Banks park N83.95tn with CBN as liquidity rises

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Nigerian banks significantly increased the amount of funds placed with the Central Bank of Nigeria through its Standing Deposit Facility in July, indicating a sharp rise in excess liquidity within the financial system despite the apex bank’s tight monetary policy stance.

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Latest financial data released by the CBN showed that commercial banks deposited N83.95tn with the apex bank in July 2026, representing a 670.2 per cent increase from N10.9 trillion recorded in the corresponding period of 2025.

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The sharp rise in SDF placements was accompanied by a steep decline in banks’ reliance on the CBN’s Standing Lending Facility, underscoring improved liquidity conditions across the banking sector.

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According to the data, banks borrowed N1.19tn through the SLF in July, an 82 per cent drop from N6.63tn recorded in July last year.

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The SDF allows banks with excess cash to place overnight deposits with the CBN and earn interest, while the SLF enables eligible banks facing temporary liquidity shortfalls to obtain short-term funding from the apex bank.

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Apart from the SLF, the CBN also provides liquidity support through repurchase transactions, under which it purchases securities from banks with an agreement that the institutions will buy them back at a predetermined date and price. Borrowing through the SLF attracts an interest rate of 500 basis points above the Monetary Policy Rate.

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The simultaneous increase in deposits and decline in borrowing suggests that banks had considerably more liquidity available during the month, reducing the need to access emergency funding from the central bank while increasing the volume of idle funds parked with the regulator.

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The development comes against the backdrop of the CBN’s decision to maintain a tight monetary policy framework aimed at reining in inflation and anchoring price stability.

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At its most recent Monetary Policy Committee meeting, the apex bank retained the Monetary Policy Rate at 26.5 per cent. It also left unchanged the asymmetric corridor around the MPR at +50 basis points and -450 basis points, while keeping the Cash Reserve Ratio for commercial banks at 45 per cent, the CRR for merchant banks at 16 per cent and the 75 per cent CRR on non-Treasury Single Account public sector deposits.

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“Movements in the SDF and SLF windows provide important insight into banking sector liquidity. Rising SDF balances typically indicate that banks are holding excess cash that cannot immediately be deployed into lending or investments, while lower utilisation of the SLF suggests they are under less funding pressure and have sufficient liquidity to meet short-term obligations,” said a Lagos-based banking analyst, Joel Asika.

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