Cash Crisis Hits Hard: Nigerian Banks Drain CBN Of N1.2 Trillion In A Single Day 

Cash Crisis Hits Hard: Nigerian Banks Drain CBN Of N1.2 Trillion In A Single Day 

Amid a worsening cash shortage in the financial system, Nigerian banks have borrowed a staggering N1.2 trillion from the Central Bank of Nigeria (CBN) through its Standing Lending Facility (SLF) to maintain daily operations, according to TrustBanc Financial Group Limited.……READ MORE 

The banking sector is currently grappling with a significant liquidity crunch, with a deficit of N266.55 billion as of Thursday, February 6. This marks a sharp decline from the N201 billion surplus recorded just earlier in the same week.

The shortage is largely attributed to substantial withdrawals connected to CBN’s financial auctions and an unreported foreign exchange (FX) swap settlement.

Financial experts highlight that liquidity fluctuations are normal and often driven by banks’ demand for government securities and other investments, which can swiftly impact both cash flow and interest rates.

As the trading week commenced, the financial system was already strained with a N266.5 billion shortfall, forcing banks to resort to the SLF, leading to the record N1.2 trillion withdrawal in a single day.

The liquidity squeeze has led to a spike in interbank lending rates, with the Open Buy Back (OPR) and Overnight (O/N) rates soaring over 340 basis points to close at 31.50% and 32.00%, respectively. TrustBanc analysts predict these elevated rates will persist as long as the cash shortage continues.

Earlier in January 2025, the CBN disclosed that commercial and merchant banks were compelled to borrow N8.2 trillion within the first 17 days of the year due to liquidity pressures. During this period, banks still managed to hold deposits totaling N6.69 trillion with the CBN while attempting to expand lending to the real sector.

The SLF allows banks to borrow short-term funds from the CBN to manage operational needs, while surplus cash can be deposited using the Standing Deposit Facility (SDF).