Emmanuel OchayiIn 2023, commercial and merchant banks in Nigeria increasingly sought liquidity from the Central Bank, with borrowing soaring by 32.07% to N19.81 trillion compared to the previous year’s N15 trillion, data from CBN revealed.
According to CBN documents, the surge in borrowing stems from short-term needs via the Standing Lending Facility (SLF), indicating liquidity challenges faced by banks amidst a tightening monetary policy stance.
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“The facility is typically short-term. This may not necessarily indicate that the banks are stressed or unstable,” stated Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), while addressing the liquidity pressure observed in some banks.
Tajudeen Ibrahim from Chapel Hill Denham noted, “Monetary policy has been tightening, and this has led to low liquidity. It is cheaper for banks to borrow from CBN,” underscoring concerns that sustained tightening might hinder economic growth.
In response, CBN Governor Olayemi Cardoso emphasized the institution’s focus on controlling money supply to rein in inflation, a measure that might be linked to the increased borrowing trend observed among banks in the latter part of the year.
The surge in dependence on the apex bank for liquidity raises concerns about the impact of continued tightening on economic growth, prompting experts to call for a reevaluation of the minimum capital requirement for banks, considering inflation adjustments.
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