The Business NG - March 28, 2025

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Today’s edition delves into the growing financial strain facing Nigerian banks as they turn to commercial papers (CPs) to navigate a worsening liquidity squeeze. With the Central Bank of Nigeria’s (CBN) stringent cash reserve policies pushing deposit costs to unsustainable levels, major financial institutions, including Access Holdings Plc, are now increasingly relying on CPs for funding.

The crisis is largely driven by the CBN’s 50% cash reserve ratio (CRR), which has drained ₦26.6 trillion from the financial system since September 2023. As a result, banks now face higher deposit costs, with real borrowing expenses effectively doubling due to restricted access to customer funds. The situation has been further compounded by an 875 basis points hike in the benchmark interest rate, now at 27.5%, and a standing lending facility rate of 31.75%, making traditional deposit funding less viable.

Today’s coverage examines how CPs have become a crucial alternative for banks, allowing them to secure liquidity without triggering additional CRR deductions. Analysts warn that while CPs provide temporary relief, the broader implications of these policies—on bank profitability, credit availability, and economic stability—remain uncertain.

Stay with us for expert insights, data-driven analysis, and stakeholder reactions on the evolving financial landscape.