The Central Bank of Nigeria (CBN), in its monthly economic report, said deposit money banks’ borrowings reduced significantly by 93 percent in August.
The apex bank attributed the development to the surge in idle cash (excess liquidity) in the interbank money market.
The July and August 2020 report provided also revealed that banks’ deposit of idle cash with the CBN rose by 19 percent in the same period.
Banks borrow from the CBN through the Standing Lending Facility (SLF) while they place deposit with the apex bank through the Standing Deposit Facility (SDF).
The apex bank explained that banks’ borrowing through the SLF was N112.73 billion in August down from N1.57 trillion in July, reflecting a decline of 93 percent.
However, banks’ deposit placement through the SDF rose to N441.65 billion in August from N370.92 billion in July, indicating an increase of 19 percent.
The CBN”s report reads: “Deposit Money Banks (DMBs) and merchant banks continued to access the Standing Facilities window to square liquidity positions in August 2020.
“The trend at the CBN standing facilities window showed more frequency at the Standing Deposit Facility (SDF) window, due to improved liquidity in the banking system.
“Banks took advantage of the situation to scale up operations in the face of the COVID-19 pandemic. Applicable rates for the SLF and Standing Deposit Facility (SDF) remained at 14.5 per cent and 7.5 per cent, respectively.
“The total request for the SLF granted, in August 2020, was N112.73 billion, made up of N83.30 billion direct SLF and N29.43 billion Intraday Lending Facilities (ILF) converted to overnight repo.The daily average was N9.39 billion in 12 transaction days from August 3 to 25, 2020.
“Total interest earned at 14.5 per cent was N0.06 billion.
“The total SDF granted, during the review period, was N441.65 billion with a daily average of N25.98 billion in 17 transaction days from August 3 to 25, 2020. Daily requests ranged from N6.00 billion to N41.40 billion. The cost incurred on SDF in the month stood at N0.12 billion.”