Banks Borrowing from CBN hits N3.03trn, Up By 835% In 22 Days

The dependence of the Nigerian banking sector on the Central Bank of Nigeira (CBN) soared this month with banks’ borrowings from the apex bank jumping from N323.97 billion in August to N3.03 trillion in September, signalling a severe liquidity squeeze in the period.

LEADERSHIP Weekend checks reveal that this represents a whopping 835 per cent increase over the level in August.

In a similar trend, the apex bank has invested almost N10 trillion to different sectors of the economy over the last few years with little to show it.

Data from the CBN website showed that from the beginning of this month up until the close of business on Friday, September 22, the total borrowings of banks from the CBN stood at N3.028 trillion. This is as against N323.97 billion that was accessed by banks between the beginning of August up until August 22, 2023.

The borrowings were accessed via the Standing Lending facility of the CBN. The Standing Lending Facility (SLF) is a line of short-term credit available for commercial banks to draw on when they need to meet immediate short-term withdrawals from their customers.

A net SLF is often an indication of a liquidity squeeze in commercial banks usually due to the central bank’s monetary policy or a symptom that banks have a lot of non-performing loans that they are unable to recover.

Analysts say the expanding SLFs are due to monetary tightening by the central banks to curb demand for forex as well as curb inflation, which is piling pressure on commercial banks to borrow money.

Over the last two years, the apex bank has embarked on an unprecedented monetary squeeze relying on its Cash Reserve Requirement and Loan to deposit ratio policies to sequester billions from commercial banks on a weekly basis.

Meanwhile, the Monetary Policy Committee of the apex bank continues to maintain that the banking sector remains sound. According to members of the committee in their personal statements at the last meeting held in July, the Nigerian banking industry has so far remained resilient.

A member of the MPC, Adenikinju Festus, who also affirmed the resilience of the banking industry explained that CAR had declined to 11.2 per cent in June 2023 from 13 per cent in May 2023, though still within the prudential requirement of between 10 – 15 per cent.

He furthered that NPL ratio declined from 4.5 per cent in May 2023 to 4.1 per cent in April 2023 while liquidity ratio LR) rose to 48.4 per cent in June 2023, from 44.5 per cent in May 2023. This is above the minimum 30 per cent recommended by the prudential requirement.

Adenikinju noted that both the Return on Equity and Returns on Asset increased between May 2023 and Junel 2023. ROE rose from 22.8 per cent to 32.2 per cent; while ROA increased from 1.7 per cent in May 2023 to 2.3 per cent by June 2023.

Interest margins to total operating income declined from 59.8 per cent in May 2023 to 48.2 per cent in June 2023. Similarly, operating cost to total operating income declined from 70.7 per cent to 62.1 per cent between May and June 2023.

Asides these, he noted that all the measures of banking size, assets, deposits, and credits also rose, with total assets of the banking industry growing by N30.92 trillion or 47.21 per cent between end-June 2022 and 2023. Industry credit increased by N10.75 trillion or 39.73 per cent between end June 2022 and end-June 2023. Gross credit has been on an upward trajectory since 2019. Total industry deposits increased by N15.92 trillion or 37.86 per cent between the end of June 2022 and 2023.

He however stressed that the high operating cost environment of the banking sector should be concerning and needs to be addressed. “In other climes, the ratio is 23.5 per cent in Turkey, 50.6 per cent in Brazil, 41.0 per cent in Malaysia, 62.0 per cent in South Africa, 43.2 per cent in Angola, 35.2 per cent in Egypt, Kenya is 45.2 per cent and Ghana, 46.1 per cent.

Meanwhile, LEADERSHIP checks revealed that the CBN has disbursed N9.714 trillion in financial interventions to different sectors of the economy in the last three years.

Data from the CBN’s Development Finance Department (DFD) indicate that the largest chunk of the disbursement, totaling N3.166 trillion or 32.6 percent, went to manufacturing and industries.

Other disbursements made from the N9.714 trillion are: N2.243 trillion or 23.1 percent to energy and infrastructure: N2.214 or 22.8 percent to agriculture; N1.010 trillion or 10.4 percent to services; N689.694 billion or 7.1 percent to Micro Small and Medium Enterprises (MSMEs); N233.136 billion or 2.4 percent to export and N135.996 billion or 1.4 percent to health.

The bank maintains that it’s Development Finance Department is committed to the goal of sustainable economic growth.

MPC 2022 update

According to data compiled from official statements contained in the monetary policy communique of the apex bank, the CBN disbursed a cumulative total of N4.81 trillion in intervention funds to the private sector of the Nigerian economy as of November 2022, a 6.9% increase from N4.5 trillion two months earlier.

According to the update the CBN provided in the MPC communiqué, between September and October 2022, under the Anchor Borrowers’ Programme (ABP), the Bank disbursed N41.02 billion to several agricultural projects.

The cumulative disbursement under the Programme amounted to N1.07 trillion to over 4.6 million smallholder farmers cultivating 21 commodities across the country.

The Bank also disbursed N300 billion to finance large-scale agricultural projects under the Commercial Agriculture Credit Scheme (CACS), bringing the cumulative disbursement to N745.31 billion.

The CBN released the sum of N48.30 billion under the N1 trillion Real Sector Facility to seven new real sector projects in agriculture, manufacturing, and services. Cumulative disbursement under this Facility stood at N2.15 trillion to 437 projects across the country as at November 2022.

The breakdown of the disbursement in the Real Sector Facility includes projects in manufacturing (240), agriculture (91), services (93) and mining sector (13).

Under the 100 for 100 Policy on Production and Productivity (PPP), the Bank disbursed the sum of N20.78 billion to nine (9) projects in healthcare, manufacturing, and services, amounting to a cumulative disbursement of N114.17 billion across 71 projects.

A sum of N4 billion was disbursed under the Intervention Facility for the National Gas Expansion Programme (IFNGEP) to promote the adoption of compressed natural gas (CNG) for transportation and liquefied petroleum gas (LPG) for cooking.

Under the healthcare sector, the Bank disbursed N5.02 billion to four (4) healthcare projects under the Healthcare Sector Intervention Facility (HSIF), bringing the cumulative disbursement to N135.56 billion for 135 projects in pharmaceuticals (33), hospitals (60) and other services (42).

The CBN disbursed N1.33 billion under the Agribusiness/Small and Medium Enterprise Investment Scheme (AgSMEIS). With this, cumulative disbursement rose to N150.22 billion.

Under the Micro, Small, and Medium Enterprise Development Fund (MSMEDF), the apex bank disbursed N10 billion between September and October 2022, bringing the cumulative disbursement to N96.08 billion.

Under Export Facilitation Initiative (EFI), the Bank provided support for export-oriented projects to the tune of N5.34 billion, pushing the cumulative disbursement under this intervention to N44.58 billion within the period under review. - LEADERSHIP

September 23, 2023