Banks’ Deposits With CBN Surge By 12%

Bank’s deposits with the Central Bank of Nigeria continued to witness exponential growth hitting 12 per cent Year-on-Year (YoY) as of the end of July 2022.

According to Standing Deposit Facility (SDF) data by the apex bank, banks’ deposit has witnessed a steady increase since the beginning of the year as uncertainty continued to mount over the 2023 general elections, among other factors.

The SDF is a lower corridor of the Monetary Policy Rate at which Deposit Money Banks (DMBs) and discount houses can deposit their money overnight with the CBN for an interest rate.

Another window, Standing Lending Facility (SLF), is an upper corridor monetary policy rate at which DMBs and discount houses can borrow money from the CBN at a pre-specified rate, typically the benchmark policy rate plus a margin.

The applicable interest rate on SDF moved to 7 per cent at an asymmetric corridor of +100/-700 basis points around the 14 per cent MPR in July 2022.

The CBN has over the years maintained that strong patronage at the SDF confirms healthier liquidity in the banking system.

The applicable interest was at 4.5 per cent early in 2022 when CBN maintained its MPR at 11.5 per cent.

According to the financial data by CBN, a sum of N2.32trillion has been deposited through the SDF in seven months of 2022, representing an increase of 12 per cent year-on-year (YoY) from N2.06trillion in seven months of 2021.

The Month-on-month (MoM) breakdown showed that banks in January deposited N296.8billion with CBN and it increased by 65 per cent to N489.05 billion in February.

The CBN in its economic report for the month of February disclosed that, “Activities at the Standing Facility window reflected ease in banking system liquidity during the review period. The total SDF increased significantly by 60.79 per cent, to N472.38 billion, from N293.79 billion in January 2022.”

CBN in the report noted that, “Subdued activities in the SLF window and the strong patronage at the SDF, confirm healthier liquidity in the banking system. Hence, key short-term interest rates declined, just as the Nigerian financial market showed resilience despite a volatile global financial market.

“Furthermore, activities in fixed income securities increased as investors navigate difficult economic conditions and underlying pricing pressures in search of better yields.”

A sum of N572.5billion was deposited with CBN in March, the highest in 2022, and in April, it dropped by 38.3 per cent to N353.32billion.

Deposits by banks through the SDF further dropped to N279.63billion and N265.31billion in May and June, respectively. It finally closed July at N60.26billion, a decline of 71.9per cent YoY when compared to N214.24billion deposited by banks with CBN in the prior year’s July of 2021.