In 2024, Nigerian Deposit Money Banks (DMBs) and merchant banks borrowed an unprecedented N131.42 trillion from the Central Bank of Nigeria (CBN) to address liquidity challenges arising from the apex bank’s stringent monetary policies. This figure represents a staggering 636.6% increase compared to N17.84 trillion borrowed in 2023. The highest borrowing was recorded in March 2024, at N21.74 trillion, while the lowest was in January, at N2.9 trillion. Banks relied on the Standing Lending Facility (SLF) to meet operational demands amid rising interest rates and cash shortages in the banking system.
The surge in borrowing is attributed to the CBN’s monetary policy adjustments, including a hike in the Monetary Policy Rate (MPR) from 18.75% to 27.50%, pushing SLF rates to 32.50%. Analysts link these liquidity pressures to reduced customer deposits, rising inflation, and low purchasing power, forcing banks to rely more heavily on CBN’s facilities. Meanwhile, banks’ deposits with the CBN under the Standing Deposit Facility (SDF) also rose significantly, reaching N38.12 trillion in 2024, compared to N12.29 trillion in 2023, as banks sought risk-free investments.
Experts have raised concerns about the implications of the liquidity squeeze on economic growth, with some calling for a review of the tightening policies. While the CBN argues that increased SDF patronage signals healthier liquidity, critics warn that sustained borrowing from the apex bank could indicate underlying stress in the financial system. Looking ahead, analysts predict a potential pause in the CBN’s rate-hiking cycle in 2025 as inflation moderates and the naira stabilizes.
