CBN Reopens Borrowing Window, Sets New Lending Rate at 31.75%

Nigeria’s Central Bank Lifts Suspension on Bank Borrowing Amid New Measures to Control Liquidity

In a significant policy shift, the Central Bank of Nigeria (CBN) has lifted the suspension on bank borrowings from its Standing Lending Facility (SLF), setting a new lending rate at 31.75 percent. This decision follows the 296th meeting of the Monetary Policy Committee (MPC) and marks a pivotal move in the CBN’s strategy to manage liquidity in the financial system.

The SLF provides banks with short-term funds to cover immediate liquidity needs, and the new rate underscores the CBN’s commitment to controlling excess liquidity. Authorized dealers are required to submit their SLF requests through the Scripless Securities Settlement System (S4) between 5:00 PM and 6:30 PM. For banks, this means a higher cost of borrowing, which is likely to translate into increased interest rates for loans and credit facilities, potentially impacting both businesses and consumers.

Additionally, banks can access the Intraday Liquidity Facility (ILF) without any cost if the borrowed funds are repaid within the same day. However, if the ILF is not settled on time, a 5.00 percent penalty will be imposed, with the amount being converted to SLF at an even higher rate of 36.75 percent.

These measures reflect the CBN’s broader objective to balance economic growth with inflation control by tightening liquidity. By raising the SLF rate, the CBN aims to curb excessive borrowing and, consequently, limit the availability of funds in the economy, which could help manage inflation but also pose challenges for borrowers.

Furthermore, the MPC has also revised the Asymmetric Corridor to +500/-100 basis points around the Monetary Policy Rate (MPR), resulting in the Standing Deposit Facility (SDF) rate being set at 25.75 percent for deposits up to N3 billion for commercial banks. This new structure incentivizes banks to deposit excess funds with the CBN, thereby reducing the amount of money in circulation and helping to control inflationary pressures.

These changes are part of the CBN’s ongoing efforts to maintain financial stability amid Nigeria’s evolving economic challenges. With rising borrowing costs, businesses and households may face tighter credit conditions, which could slow down economic activities but ultimately contribute to the overall stability of the financial system.

As these developments unfold, it is crucial for everyone to stay informed. To engage more closely with this evolving financial landscape, I encourage you to join my WhatsApp group, where we discuss the latest economic updates and how they affect us all. Click here to join the conversation.