CBN Lifts SLF Suspension, Banks to Earn Up to 19 to 25.75% on Deposits

Nume Ekeghe

The Central Bank of Nigeria (CBN) has lifted the suspension of its Standing Lending Facility (SLF) for banks, introducing a new interest rate structure that allows financial institutions to earn between 19 percent and 25.75 percent on deposits held with the apex bank.

The directive which is with immediate effect, followed the Monetary Policy Committee’s (MPC) decision in July to adjust the asymmetric corridor, leading to significant changes in the lending and deposit facilities offered by the CBN.

At its July meeting, the MPC raised the Monetary Policy Rate (MPR) by 50 basis points to 26.75 percent, up from 26.25 percent, and adjusted the asymmetric corridor around the MPR to +500/-100 basis points from the previous +100/-300 basis points.

This adjustment set the stage for the CBN’s recent changes in its lending and deposit facilities.

In a latest circular signed by the Director of the Financial Markets Department, Dr. Omolara Duke, the CBN outlined the new interest rate structure for deposits. Commercial and merchant banks will now earn up to 25.75 percent on deposits up to N3 billion. Deposits exceeding N3 billion will attract a lower rate of 19 percent.

Similarly, Payment Service Banks (PSBs) would receive 25.75 percent interest on deposits up to N1.5 billion, while deposits above this threshold will also earn 19 percent.

The circular further announced the lifting of the SLF suspension, allowing banks to borrow from the CBN at a rate of 31.75 percent. Banks can access the SLF through the Scripless Securities Settlement System (S4) within the specified operating hours of 5:00 pm to 6:30 pm. Additionally, authorised dealers are permitted to access the Intraday Lending Facility (ILF) at no cost, provided it is repaid on the same day.

It stated: “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 Scripless Securities Settlement System (S4) within the operating hours of 5.00pm to 6.30pm.

“To this end, Authorised Dealers are permitted to access the SLF at 31.75 per cent; Permitted to access Intraday Lending Facility (ILF) to avoid system gridlock at no cost if repaid the same day;

“The 5.00 per cent 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 per cent;

“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.”