Do you know that most Deposit Money Banks (DMB) are surviving on loans obtained from the Central Bank of Nigeria (CBN)?

Borrowings from banks rose by 65.5% in February 2024, which shows that businesses in Nigeria are struggling to keep afloat.


DMB's Borrowings From CBN Rises To ₦5.96trn

The Central Bank of Nigeria (CBN) says the commercial banks in Nigeria are borrowing more from the bank.


In its Financial Data for February 2024, the CBN indicated that many deposit money banks are resorting to heavy borrowing. This is to enable them to meet their regulatory and other liquidity obligations.

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Data shows that banks’ borrowing from the CBN Standing Lending Facility (SLF) increased by 65.5% to ₦5.96 trillion in February from ₦‎3.6 trillion in January 2024.

The banks also deposited ₦‎330.71 billion in the CBN’s Standing Deposit Facility (SDF) in the same period.

According to data, this represents a 72.4% month-on-month decline when compared with ₦‎1.2 trillion deposited in January 2024.

This development is coming at the backdrop of the various CBN policies to prepare banks against vulnerabilities from within and outside Nigeria.


One of the latest policies is the increase in the benchmark interest rate, the Monetary Policy Rate, MPR, to 22.75% from 18.75%, and the Cash Reserve Ratio, CRR, to 45% from 32.5% last week.

See What Analysts are Saying

Furthermore, analysts believe that the increase in interest rate would raise asset yields of some banks by an average of 400 basis points in the financial year end of 2024.


Also, in their Banking Sector update report for March, analysts at CardinalStone Research said: “Based on the first and second-order impacts of the rise in auction stop rates and 400 basis points increase in MPR to 22.75%, we now forecast asset yields to rise by an average of 400 basis points across our coverage banks in FY 2024.

“This adjustment suggests a mean 83.4% increase in interest income for our banking coverage.

“While the discontinuation of daily CRR debits is positive, the recent decision of the MPC to raise statutory CRR to 45% may appear a downside risk to interest income.

“This suggests that banks can now only deploy 55% of new deposits to interest-earning opportunities, assuming strict adherence to other rules (such as the loan-to-deposit ratio).

“We are of the view that the surging interest rate environment may increase pressure on banks to step up on the dividend front in the coming months.

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This may open avenues for decent dividend income (vs de-annualised return from fixed income options) in the near term.

“In our view, adverse macroeconomic conditions going to increase the risk of non-performing loans (NPLs) in FY 2024.

“You see, sectors heavily reliant on raw materials from abroad and equipment maintenance like manufacturing will be badly hit by the short-term cost implications of ongoing reforms.”


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