In apparent reflection of the improved liquidity in the interbank money market, banks’ borrowing from the Central Bank of Nigeria, CBN, fell by 46 per cent, month-on-month, MoM, to N1.3 trillion in January.
On the other hand banks increased deposit of idle funds with the CBN by 29 per cent, MoM, to N272 billion in January.
The CBN has two short term lending windows for banks, namely, the Standing Lending Facility (SLF) and Repo lending.
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While the CBN lends money to banks through the SLF at interest rate of 100 basis points (bpts) above the Monetary Policy Rate (MPR), it also lends money to banks through Repurchase (Repo) arrangement, which involves the purchase of banks’ securities with the agreement to sell back at a specific date and usually for a higher price.
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