CBN Adjusts Standing Lending and Deposit Facilities
By Patience Ikpeme
The Central Bank of Nigeria (CBN) has announced significant changes to its monetary policy tools, effective immediately. In a circular signed by Director of Financial Markets Department, Dr. Omolara O. Duke, the CBN has lifted the suspension of the Standing Lending Facility (SLF) as a result Authorised Dealers can now access the SLF at a rate of 31.75 percent.
To avoid systems gridlock, Authorised Dealers can access the Interbank Lending Facility (ILF) at no cost if they repay the same day. The apex bank however retained the 5% penalty in which case participants who fail to settle their ILEs will be subject to a 5% penalty and their unsettled amounts will be converted to SLF at 36.75 percent. The CBN will rediscount instruments pledged by participants at the penal rate, as stipulated in the approved repo guidelines.
These changes are in line with the Monetary Policy Committee (MPC)’s decision to adjust the upper corridor of the standing facilities to 5.00 percent from 1.00 percent around the MPR.
In a related development, the CBN has also issued a circular operationalizing the Standing Deposit Facility (SDF) asymmetric corridor. The SDF rates have been adjusted as follows: Commercial and Merchant Banks, 25.75% for deposits up to N3 billion and 19.00% for excess deposits. Payment Service Banks, 25.75% for deposits up to N1.5 billion and 19.00% for excess deposits.
The adjustment of the SDF is in response to the MPC’s decision to widen the asymmetric corridor to +500/-100bps from +100/-300bps around the MPR.
These changes are aimed at improving the efficiency of the interbank market and supporting the overall stability of the financial system. By adjusting the SLF and SDF rates, the CBN is seeking to balance the need for liquidity in the system with the goal of maintaining price stability.
