CBN Lending to Commercial Banks Drops by 25% in Q1

Owing to the wide spread of Coronavirus and the eventual states shutdown, the Central Bank of Nigeria (CBN) lending to commercial banks dropped by 25 per cent in the first quarter of 2020,our correspondent has gathered.

Commercial banks operating in the country used Standing Lending Faculty (SLF) to access funds from the apex bank to finance their daily business.

SLF simply means commercial banks accessibility to funds from the CBN to carry out its day-to-day business activities.

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Our correspondent gathered that commercial banks borrowing from the CBN’s SLF window showed less patronage in between January and February but increased in March.

Further findings revealed that commercial banks and the merchant banks in Q1 2019 increase access to the SLF window to square-up their position following tight liquidity in the financial sector.

However, the Monetary Policy Committee (MPC) at this year voted to retain Monetary Policy Rate (MPR) at 13.50 per cent, applicable to SLF interest rate of 15.50 per cent.

Our correspondent further gathered that in the Q1 of 2020, commercial banks operating in the country borrowed N2.03trillion from CBN, 25per cent decline from N2.7trillion borrowed in Q1 2019.

The breakdown revealed that in January 2020, CBN lends N576.9billion to commercial but dropped to N486billion in February and increased to N963.5billion in March of 2020.

In the prior year’s Q1, commercial banks had borrowed N833.6billion from CBN in January 2019, the total borrowing moved to N992billion in February and dropped to N885.07billion in March.

Our correspondent gathered that commercial banks in the fourth quarter had reduced borrowing from the apex bank and focused more on Loan-to-Deposit (LDR) deadline which mandates them to give soft credit to key sectors in the nation’s economy.

Responding, analysts said commercial banks responded to the 14-day lockdown in major cities due to the widespread of Coronavirus pandemic.

Nigeria as at Sunday had reported 224 cases with Lagos and Abuja reporting 115 and 45 cases respectively.

The MD/CEO, Enterprise Stockbrokers Plc, Rotimi Fakayejo attributed the decline in lending to total lockdown in the nation’s economy, stressing that commercial banks have opted to borrow less from the apex bank.

According to him, the uncertainty is forcing commercial banks to hold and do little transactions and it can only be worst if the lockdown in Lagos, Ogun and Abuja is extended.

The Chief Economist/Head, Investment Research of PanAfrican Capital Holdings Ltd, Mr. Moses Ojo noted that commercial banks reacted to present reality in the country.

According to him, “The present economy situation tends to discourage borrowing from CBN. Commercial banks are not operating and you do not expect borrowing from CBN at this time. The nation’s business environment is affected by the lockdown and banks are only interested in making funds available to their customers via ATMs and other means.”

He predicted increased borrowing once the 14-day lockdown is over, stressing that commercial banks would aggressively borrow from CBN to drive economy recovery.