CBN lifts ban on lending to banks, pegs interest rate at 31.75%

The Central Bank of Nige­ria (CBN) on Monday lifted the suspension on lending to banks through its Stand­ing Lending Facility (SLF), adjusting the lending rate to 31.75 percent interest rate while the Standing Deposit Facility (SDF) was adjusted to 25.75 percent.

CBN, in a circular signed by its Director, Fi­nancial Market Depart­ment, Dr. Omolara Duke, also said that commercial and merchant banks would earn a 19 percent interest rate on deposits above N3 billion in its Standing De­posit Facility (SDF). There is also 19 percent interest on deposits above N1.5 bil­lion for Payment Service Bank (PSB).

The CBN has also lifted the suspension of the stand­ing deposit facility for banks in the country and fixed in­terest on their deposits be­tween 19 and 25.75 percent.

The decision followed the adjustment of the apex bank’s asymmetric corridor at the last Monetary Policy Committee (MPC) meeting.

At its last meeting in July, the MPC had raised the monetary policy rate by 50 basis points to 26.75 per­cent from 26.25 percent and adjusted the asymmetric corridor around the MPR to +500/-100 from +100/- 300 basis points, whilst leav­ing other parameters un­changed.

According to the circu­lar issued to all authorised dealers, the apex bank said the interest rate on depos­its would be based on the amount deposited.

According to the circular, commercial and merchant banks will get up to 25.75 percent interest for depos­its up to N3 billion, while de­posits above N3 billion, will attract a 19 percent interest.

For Payment Service Banks (PSBs), deposits up to N1.5 billion will earn them the 25.75 percent interest whilst deposits above N1.5 billion will attract interest of 19 percent.

Explaining the reason be­hind the SLF rate, the apex bank said that the direction was based on the decision of the Monetary Policy Com­mittee (MPC) adjusting the upper corridor of the stand­ing facilities to 5.00 percent from 1.00 percent around the Monetary Policy Rate (MPR), at its 296th meeting.

CBN said: “The Monetary Policy Committee (MPC) ad­justed the upper corridor of the standing facilities to 5.00 percent from 1.00 percent around the MPR, at its 296th meeting.

“Consequently, the sus­pension of the Standing Lending Facility (SLF) is hereby lifted and authorised dealers should send their re­quest for SLF through the Scriptless Securities Settle­ment System (S4) within the operating hours of 5.00pm to 6:30p.m.

“To this end, authorised dealers are permitted to access the SLF at 31.75 per­cent; permitted to access Intraday Lending Facility (ILF) to avoid system grid­lock at no cost if repaid the same day.

“The 5.00 percent penalty (as stated in the S4 business rules) is retained, for par­ticipants that do not settle their ILF, which the system will convert to SLF at 36.75 percent;

“Collateral execution (the rediscounting of in­struments pledged by par­ticipants at the penal rate by CBN) is reintroduced as stipulated in the approved repo guidelines. ‘The circu­lar takes immediate effect.’”