Deposit banks’ borrowing from the Central Bank of Nigeria (CBN) rose year-on-year (YoY) by 12 per cent to N2.02 trillion in September 2022, under the Standing Lending Facility (SLF) and Repo lending.

The CBN has two short term lending windows for banks namely the Standing Lending Facility (SLF) and Repo lending.

While the CBN lends money to banks through the SLF at interest rate of 100 basis points (bpts) above the Monetary Policy Rate (MPR), it also lends money to banks through Repurchase (Repo) arrangement, which involves the purchase of banks’ securities with the agreement to sell back at a specific date and usually for a higher price.

On the other hand, the CBN accepts deposits from banks through its Standing Deposit Facility (SDF) and pays an interest rate of 700 bpts below the MPR.

Data from the CBN Financial Statistics for September 2022 showed that banks’ borrowing through Repo arrangement rose in September 2022 by 13 per cent, YoY, to N1.19 trillion from N1.05 trillion in September 2021.

Similarly, banks’ borrowing through the CBN’s SLF rose by 10 per cent, YoY, to N836.48 billion in September 2022 from N756.37 billion in September 2021.

Consequently, banks’ borrowing from the apex bank through the SLF and Repo rose by 63 per cent YoY to N2.02 trillion in September 2022 from N1.8 trillion in September 2021.

Further analysis of the data also showed that banks deposits in CBN’s SDF also increased YoY by 23.5 percent to N260.2 billion in September 2022 from N210.6 billion in September 2021.

In its Macroeconomic outlook for the second half of 2022, analysts at Cowry Assets Management Limited noted that the banking sector lags behind every other sector bar Industrial in the year to date (ytd) performance.

Group Managing Director, Cowry Asset Management Group, Mr. Johnson Chukwu said: “The industry lags behind every other sector bar Industrial in the ytd performance.

“The NGX Banking Index dropped from 406.1 index points to 378.2 index points, depreciating by -6.86 percent. Given adverse operating conditions currently observed, there will be a higher proportion of Non-performing Loans (NPLs) in the banking sector.”

Vanguard