Commercial banks’ deposits with the Central Bank of Nigeria (CBN) have surged significantly, rising by 783.7 percent year-on-year to N79.8 trillion in the first seven months of 2025, up from N9.03 trillion in the corresponding period of 2024. The spike indicates a glut of liquidity within the banking system.
The trend reflects banks’ increasing reliance on the CBN’s Standing Deposit Facility (SDF), which allows lenders to park excess funds with the apex bank at an interest rate of the Monetary Policy Rate (MPR) minus 100 basis points. With the MPR currently at 27.5 percent, the effective interest on SDF deposits stands at 26.5 percent.
Data from the CBN showed that deposits in the SDF rose by 158.4 percent quarter-on-quarter to N49.68 trillion in the second quarter of 2025, compared to N19.22 trillion in Q1. However, on a monthly basis, deposits dropped by 29.2 percent to N10.9 trillion in July from N15.4 trillion in June.
Analysts attribute the high SDF figures partly to the CBN’s policy shift last year to a single-tier remuneration structure for the facility, which has made it more attractive for banks to lodge idle funds.
Meanwhile, banks’ borrowing from the CBN through the Standing Lending Facility (SLF) fell by 11.6 percent year-on-year to N66.47 trillion in the first seven months of 2025, down from N75.19 trillion in the same period last year.
The SLF allows banks to access funds from the apex bank at a rate of MPR plus 500 basis points. Despite the annual drop, banks’ borrowing through the SLF rose significantly by 61 percent quarter-on-quarter, climbing to N50.46 trillion in Q2 2025 from N9.38 trillion in Q1. Monthly SLF borrowings also surged by 245.3 percent to N6.63 trillion in July, from N1.92 trillion in June.
Experts say the decline in annual SLF borrowings reflects liquidity tightness in the interbank market, a condition partly caused by the CBN’s aggressive liquidity mop-up through Open Market Operations (OMO).
CBN data shows that the apex bank sold N11.53 trillion worth of OMO treasury bills in the first seven months of 2025, marking a 75.2 percent increase from the N6.58 trillion sold during the same period in 2024. This move aimed to absorb excess liquidity from the banking system.
Consequently, the cost of funds in the interbank market rose sharply, with the average interest rate on collateralized Open Buy Back (OBB) transactions climbing to 31.6 percent at the end of July 2025, up from 25.75 percent recorded a year earlier.
