Central Bank of Nigeria Lifts Suspension on Bank Borrowing, Sets Lending Rate at 31.75%
In a move aimed at stabilizing the financial market, the Central Bank of Nigeria (CBN) has lifted its suspension on banks borrowing from its Standing Lending Facility (SLF). The apex bank also announced a lending rate of 31.75% at its 296th Monetary Policy Committee (MPC) meeting.
According to a statement released by Director of Financial Markets Department, Omolara Duke, on August 26, 2024, the MPC adjusted the upper corridor of the standing facilities to 5.00% from 1.00% around the MPR. This decision will allow Authorised Dealers to access the SLF at 31.75% and the Interbank Lending Facility (ILF) to avoid system gridlock at no cost if repaid the same day.
Duke emphasized that the 5% penalty will still be applicable for participants who fail to settle their ILF, which will be converted to SLF at 36.75%. Additionally, collateral execution, which involves the rediscounting of instruments pledged by participants at the penal rate by CBN, has been reintroduced as stipulated in the approved repo guidelines.
The CBN’s decision to lift the suspension on bank borrowing is expected to provide relief to the financial sector, which has been grappling with liquidity issues. The move is also seen as a step towards maintaining monetary stability and promoting economic growth in Nigeria.
