Kayode Tokede
On the again of excessive benchmark charges, financial uncertainty and credit score threat issues, banks closed 2025 with N336.2 trillion whole deposit with the Central Financial institution of Nigeria (CBN), about 777.2 per cent 12 months-on-12 months (YoY) enhance over N38.33 trillion deposited in 2024.
Banks and service provider banks deposit extra money at CBN through the Standing Deposit Facility (SDF) window. The CBN lends the funds to any financial institution needing liquidity by way of its Standing Lending Facility (SLF) window.
Evaluation of the CBN monetary information for 2025 revealed that banks and service provider banks deposited additional cash than they borrowed to underline extra liquidity within the monetary sector.
The information revealed that banks and service provider banks borrowed an estimated N69.7 trillion in 2025, representing a decline of 47.2 per cent from N131.99 trillion borrowed in 2024.
Earlier in the yr, SLF demand remained comparatively excessive at N24.8 trillion in February 2025, barely earlier than easing to N16.49 trillion in March 2025.
In the direction of the top of 2025, banks and service provider banks’ deposits with CBN witnessed a major enhance, reaching an all-time excessive of N64.55 trillion in October 2025.
The blended conduct between deposit and lending by CBN to banks and service provider banks confirmed that though system liquidity was strengthening in 2025, some establishments nonetheless required in a single day help to rebalance their books and lend to the actual sector.
Analysts attributed the expansion in banks and service provider banks deposit to excessive credit score threat issues and a choice for the protection of the regulator window moderately than lending into the actual sector.
In a chat with THISDAY, Funding Banker & Stockbroker, Mr. Tajudeen Olayinka acknowledged that, “With excessive benchmark charges for lending and borrowing, and issues about credit score threat and financial uncertainty, banks could choose the relative security of the SDF. It provides them a identified return moderately than extending credit score into unsure territory.”
Whereas banks and service provider banks eagerly positioned extra funds with the apex financial institution, borrowing from the CBN slowed as pressures within the interbank market relaxed.
The rise signalled a restoration in liquidity situations and a extra comfy money stance heading into 2026.
He defined that the sharp surge in Nigerian SDF placements with the CBN, subsequently, is greater than a fleeting statistic.
“It captures a deeper pressure between liquidity abundance and lending reluctance within the monetary system. Beneath the numbers lies a posh net of warning, coverage tightening, and an financial system grappling with uncertainty. Banks should not appearing irrationally. They’re responding to indicators from an setting marked by excessive inflation, trade price volatility, and weak shopper confidence,” he added.
“It captures a deeper pressure between liquidity abundance and lending reluctance within the monetary system. Beneath the numbers lies a posh net of warning, coverage tightening, and an financial system grappling with uncertainty. Banks should not appearing irrationally. They’re responding to indicators from an setting marked by excessive inflation, trade price volatility, and weak shopper confidence,” mentioned Vice President, Highcap Securities Restricted, Mr. David Adnori.
In accordance with him, the CBN’s aggressive financial tightening, with the MPR held at 27per cent, has made the SDF price of about 25.75 per cent significantly engaging.
“Confronted with this actuality, banks choose to earn practically risk-free returns by inserting funds with the CBN moderately than extending credit score to companies struggling underneath heavy enter prices and unsure demand,” he defined.
Amid drop in MPR to 27 per cent in 2025, the CBN adjusted the standing amenities hall across the MPR to +50basis factors/-450basis factors from the earlier: +250basis -250 foundation factors.
Cordros Analysis in a report after the November 24-25 MPC assembly acknowledged that, “Opposite to our expectations of a 100basis factors discount, the MPC retained the MPR at 27per cent, regardless of the sharper disinflationary outturn in current months and the appreciation of the naira.
“In accordance with the MPC, inflation stays elevated at double-digit ranges, underscoring the necessity to maintain rates of interest excessive to strengthen the disinflationary development. Nonetheless, the Committee signalled an easing bias by adjusting the uneven hall to +50/-450basis factors (Earlier: +250basis factors/-250basis factors) across the MPR.
“This means a discount in rates of interest for the SLF and the SDF to 27.5per cent (Earlier: 29.5per cent) and 22.5per cent (Earlier: 24.5per cent), respectively. The adjustment is predicted to ease financial situations and strengthen banks’ personal sector credit score growth.
“Going into 2026, we anticipate inflation to proceed easing as key drivers unwind, together with sustained naira stability, higher harvest outcomes and comparatively steady petroleum costs. Nonetheless, according to the MPC’s worth stability aim and provided that inflation is prone to stay in double digits in 2026, we imagine the tempo of rate of interest cuts will seemingly stay measured.”
The relevant charges for the SDF and SLF in 2023 elevated by 50 foundation factors to 11.50 and 19.50 per cent, respectively, following the hike within the coverage price by 50 foundation factors to 18.75 per cent in June 2023.
The rate of interest at which these banks borrow from CBN modified in 2024 amid the Financial Coverage Committee (MPC) hike in MPR or rate of interest.
In 2024, the MPC members voted to extend rate of interest from 18.75 per cent to 27.50 per cent amid its mandate to deal with inflation price and unstable Naira on the overseas trade market. Nonetheless, the MPC members of the CBN in direction of the top of September 2025 voted to cut back MPR by 50 foundation factors to 27per cent, marking a major shift to an expansionary financial coverage.
This transfer, which comes amid 5 consecutive months of sustained disinflation, goals to spice up financial exercise and tackle liquidity points within the banking system.The choice was influenced by the autumn within the inflation price from 24.8per cent in January 2025 to 18.02per cent in September 2025.
The rise in SDF is approaching the backdrop of CBN removing of the cap on the remunerable coverage, amongst others.
The CBN governor, Mr. Olayemi Cardoso had disclosed that the apex financial institution eliminated the cap on the remunerable SDF to extend exercise within the SDF window and handle liquidity.
CBN had maintained that the robust patronage on the SDF confirmed more healthy liquidity within the banking system, stressing that banks and service provider banks had been looking for higher yields.
The present inflation price in Nigeria is above yield on Treasury payments (T-Payments) as banks and service provider banks are in search of risk-free investments, which SDF has offered since MPR hike.
On the impression on mounted earnings, Cordros Analysis added that, “With the MPC sustaining the MPR, the mounted earnings market enters the remainder of the yr with a steady coverage anchor that ought to help a continued, albeit marginal, yield decline. Exactly, we anticipate a measured decline throughout the curve, pushed largely by improved liquidity situations and a slower inflation trajectory.
