CBN SDF policy may force banks to lend to real sector





Financial analysts have said that the Central Bank of Nigeria  (CBN) recent policy on Standing Deposit Facility (SDF) may compel  banks to lend to the real sector of the economy.
They also said that apart from lending to real sector , it will also force banks to trade regularly with one another in the interbank market.


The apex bank last week announced a new policy, saying  it would no longer remunerate daily bank deposit in excess of N2 billion placed at its SDF.
The SDF is a window where banks can place excess funds overnight with the CBN. The interest to be earned on such funds is determined with reference to the lower band of the asymmetric corridor around the Monetary Policy Rate as prescribed by the Monetary Policy Committee (MPC).
Commenting of the new SDF, an economists, Mr Ifeanyi Obidigbo described the policy as the CBN  silent method of mopping up liquidity from banks without issuing government securities to them.He further said that with the new development the apex bank would have more funds from banking system without any cost.


An analyst Mr Adebola Adewale said the new policy will likely reduce the cost of managing system liquidity for the CBN as the apex regulator will have access to more fund.
He stated that this pushed banks to begin to lend to one another, which would result in the reduction in the interbank interest rate as there would be increase in liquidity in the system.


It could be recalled that prior to 2014 banks can deposit any amout of money with the CBN and would remunerate for the amount but the CBN in November 2014 pegged the minimum remunerated deposit through the window at N7.5 billion before reducing it last week to N2 billion.

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