Banks’ borrowings from the Central Bank of Nigeria, CBN, Standing Lending Facility, SLF, increased Year-on-Year, YoY, by 458.2 percent to N57.5 trillion in the first half of this year (H1’24) from N10.25 trillion in the corresponding period of 2023.
Data from the CBN also showed that banks’ deposits in the apex bank’s Standing Deposit Facility, SDF, grew YoY by 62 percent to N7.94 trillion during the same period from N2.99 trillion in H1’23.
Banks make use of the SLF window to access liquidity to run their operations while the Standing Deposit Facility window (SDF) on the other hand, is an overnight deposit facility that allows banks to lodge excess liquidity (money) with the CBN and earn interest.
The CBN data showed that banks/discount houses opening balance as at June 28th 2024 stood at N309.97 billion. This represents a 73.3 percent decline when compared with N1.16 trillion as at June 30th 2023.
The development is coming at a time the CBN is tightening monetary policy and also when banks are executing their recapitalization programe.
However analysts have projected more tactical positioning as banks provide new information on their capital raise plans.
In their 2024 mid-year Economic Outlook for Nigeria, analysts at CardinalStone Research said: “The announced banking sector recapitalisation plan is yet to birth mergers and acquisitions, which would have prompted a tactical dash to the shares of targets (possibly Tier 2 and Tier 3). “For most banks, all the options suggested by the CBN remain under consideration, with FCMB open to selling some of its subsidiaries.
“With the timeline for completion of the program set in 2026, we still see legroom for inorganic corporate actions capable of driving investment upside in the space.
“In the interim, tactical plays have greeted the organic approaches to recapitalisation communicated by most banks, with Fidelity’s announcement of rights and public offer prices that are below the market close price on the announcement day driving bearish reaction while AccessCORP’s decision to fix its rights price at above market interpreted as some leading indicator of where the share price should be, leading to bullish reaction.
“We see legroom for more tactical positioning as banks provide new information on their raise plans.
“We also see latitude for Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) inflows into the banking sector, given the limited depth of the domestic market and materially cheap valuations vs Europe Middle East and Africa (EMEA) and global peers.”