There are indications that Deposit Money Banks (DMBs) and merchant banks are increasingly dependent on the Central Bank of Nigeria for liquidity following the increased rate of borrowings which has hit ₦53.7 trillion as of the first five months of 2024.
As of the same period in review last year, the borrowings by financial institutions from the CBN stood at ₦10.02 trillion indicating that the increase in 2024 represented a Year-on-Year (YoY) increase of 436%.
In order to borrow funds from the CBN, banks and merchant banks make use of the apex bank’s Standing Lending Facility (SLF) window, a short-term lending window for banks and merchant banks, to access liquidity to run their day-to-day business operations.
There is also the Standing Deposit Facility window (SDF) which is used when the banks make deposits with the apex bank.
Further analysis of the borrowing during the period revealed that in January 2024, DMBs and merchant banks borrowed ₦2.97 trillion from CBN.
In January 2023, DMBs and merchant banks borrowed ₦528.2 billion, indicating an increase of about 462.3% when compared to the amount in 2024.
DMBs and merchant banks borrowed the sum of ₦5.97 trillion from CBN in February 2024, this indicated an increase of 1215% from ₦453.7 billion borrowed by the financial institutions in February 2023.
DMBs and merchant banks in March 2024, received ₦21.74 trillion as borrowed funds from the CBN, this amount indicated a 447% when compared to ₦3.98 trillion borrowed in March 2023.
DMBs and merchant banks also borrowed the sum of ₦12.17 trillion from the CBN in April 2024, indicating an increase of 172.3% from ₦4.47 trillion borrowed in April 2023.
The amount borrowed by the DMBs and merchant banks as of May 2024, stood at ₦10.87 trillion, a significant increase of 1741% from ₦590.29 billion borrowed in May 2023.
According to financial analysts, the increased borrowing shows some of the banks are going through liquidity pressure as a result of the crisis in the country's foreign exchange market, coupled with rising inflation rate.