Banks in Nigeria have significantly ramped up their deposits with the Central Bank of Nigeria (CBN), rising by an astounding 783.7% 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. This record surge underscores a major shift in banking liquidity patterns and highlights evolving monetary policy impacts across the financial sector.
The data, sourced from the CBN and analyzed by our correspondent, shows that the increase reflects not only excess liquidity within the banking system but also the strategic response of banks to recent adjustments in CBN’s interest rate frameworks.
The CBN provides banks with two primary short-term borrowing windows — the Standing Lending Facility (SLF) and Repurchase Agreements (Repos) — and accepts deposits through the Standing Deposit Facility (SDF).
Under the current structure:
The CBN lends to banks via SLF at a rate of 500 basis points above the Monetary Policy Rate (MPR).
Conversely, SDF deposits earn interest at MPR minus 100 basis points, currently 26.5% with the MPR set at 27.5%.
This rate environment has encouraged banks to lodge more idle funds with the apex bank, especially in the SDF, as a low-risk avenue for earnings.
Trend analysis reveals that in Q2 2025 alone, bank deposits through the SDF increased by 158.4% quarter-on-quarter to N49.68 trillion, up from N19.22 trillion in Q1 2025. However, a dip was recorded in July, when banks deposited N10.9 trillion, representing a 29.2% drop from June’s N15.4 trillion, suggesting short-term liquidity repositioning.
At the same time, bank borrowings via the SLF fell 11.6% year-on-year to N66.47 trillion in the seven-month period, down from N75.19 trillion in 2024. Yet quarter-on-quarter, SLF borrowings rose significantly by 61% to N50.46 trillion in Q2 2025 from N9.38 trillion in Q1.
This dual trend — rising deposits and selective borrowing — highlights the banks’ careful navigation of the interest rate landscape to maximize returns and minimize cost.
Experts attribute this financial behavior to:
The Single-Tier SDF Remuneration Policy, introduced in 2024, which standardizes deposit returns, encouraging higher SDF volumes.
Tight liquidity conditions in the interbank money market, leading banks to prefer the relative safety of CBN deposits.
Aggressive liquidity mop-up operations by the apex bank through increased issuance of Open Market Operation (OMO) treasury bills, which rose by 75.2% to N11.53 trillion in 7M’25 from N6.58 trillion in 7M’24.
As a result, the cost of interbank lending has surged. The Open Buy Back (OBB) rate — a key indicator of short-term borrowing — rose to 31.6% by the end of July 2025, up from 25.75% in July 2024.
The sharp rise in bank deposits with the CBN signals:
Excess system liquidity that banks are unable or unwilling to deploy for lending amid rising risks or unfavorable lending margins.
Caution within the financial ecosystem, as institutions park funds with the apex bank rather than engage in higher-risk interbank or commercial lending.
A need for more balanced monetary policy tools to encourage productive deployment of capital while ensuring inflation and currency stability.
As Nigeria’s economic managers continue to grapple with inflationary pressures, exchange rate volatility, and sluggish credit growth, the pattern of deposit surges at the CBN may persist unless structural adjustments are made to boost credit expansion and confidence in market instruments.
Stakeholders in the financial sector are also calling for broader financial market reforms and enhanced liquidity management frameworks to redirect these idle funds toward productive sectors such as SMEs, manufacturing, and infrastructure — critical for economic recovery and inclusive growth.