The high demand of Nairas: the banks borrowing from CBN increases to 4.7 billion nairas as the deposits block

• There seems to be a change in trends because the banks borrow more from the CBN to respond to liquidity requests for the Naira
• Banks borrowed 4.7 Billions from Nairas from the Nigeria Central Bank last week, almost five times compared to the previous week
• During the same period, bank deposits have decreased sharply by almost 60%, which suggests that banks require more money to respond to Nairas requests

Legitimate.ng Journalist Ruth Okwumbu-Imafidon has more than a decade of experience in trade relationships in the digital and general public media.

A liquidity crisis could brew, while banks borrowing Central Bank of Nigeria (CBN) increased by almost 400% in a week in order to respond to liquidity requests.

CBN data show that banks borrowed 4.72 billions from n ° 72 last week, compared to 953.11 billion n ° the previous week.

This represents almost five times the previous amount, marking 395% growth in week in week.

The loans were granted in two categories – the permanent loan center (SLF) and the buyout agreement (repo) – both banks use liquidity gaps.

Banks take CBN for bridge the liquidity gaps

The Apex bank has two loan facilities, other banks could take advantage of to fill their cash flow gaps, but this has a cost – interest.

The installation of permanent loan (SLF) can be consulted by banks at an interest rate which is 500 points of base higher than the MPR reference rate.

The redemption arrangement (repo) implies Cbn Buy bank titles with an agreement to sell in cash on a later date. The income price is often higher than the purchase price.

Bank deposits with cbn crash wow

During the same period, bank deposits with Apex Bank decreased sharply, despite the increase in interest rates, reports Vanguard.

From the deposit of N2.69 Billions of Nairas the previous one, the banks deposited only 1.16 Billion de Nairas with the CBN last week.

This marks a decrease of 56.8% of deposits, even if the interest rates were increased to 25.75% in August 2024, and again to 26.5% in November 2024 after the 298th meeting of the Policy Committee monetary (MPC).

This means that banks have deposited less, even if the interest rates were attractive enough to have encouraged more deposits. What does that mean?

There are suggestions that CBN tightening measures to reduce inflation May also have triggered the increase in borrowing from banks.

The demand for the Naira is high

Economic analyst Olide Adesina, who spoke to Legitimate.ng, said the data does not necessarily translate into a liquidity crisis.

He observed that there had been a request for the nairas Recently, especially after Appreciation of Nairas Over the past two weeks, and it could also have influenced the situation.

Adesina noted that investors have also injected more funds into the money Market and scholarship, which could result in less offer to banks and high demand for Naira.

Banks borrow N1.2 Billions in one day

In related news, Legitimate.ng have reported that Nigerian Banks borrowed On 1.2 Billion of the central bank of Nigeria (CBN) in one day to meet their financial needs.

Banks have contracted the loan to facilitate cash shortage in the financial system and support loans to various sectors.

The reports indicate that banks had low cash reserves at the time because customers had made significant withdrawals for expenses and other purposes.

Source: Legit.ng