The Central Bank of Nigeria (CBN) recorded a dramatic 783.7% year-on-year increase in banks’ deposits, soaring to N79.8 trillion in the first seven months of 2025, up from N9.03 trillion in the same period of 2024, signaling significant excess liquidity in the banking system. The surge, reported by Vanguard, reflects banks’ heavy reliance on the CBN’s Standing Deposit Facility (SDF), which offers an interest rate of 26.5%, calculated as the Monetary Policy Rate (MPR) of 27.5% minus 100 basis points.
Quarterly data shows a 158.4% rise in SDF deposits, reaching N49.68 trillion in Q2 2025 from N19.22 trillion in Q1 2025. However, monthly deposits dipped by 29.2% to N10.9 trillion in July from N15.4 trillion in June, indicating some fluctuation in liquidity management. The CBN’s shift to a single-tier remuneration structure for SDF in 2024, aligning rates with the MPR, has driven increased patronage, as banks capitalize on the attractive 26.5% return.
In contrast, banks’ borrowings through the CBN’s Standing Lending Facility (SLF), which charges 500 basis points above the MPR (32.5%), fell 11.6% year-on-year to N66.47 trillion in the first seven months of 2025 from N75.19 trillion in 2024. Quarterly borrowing, however, jumped 61% to N50.46 trillion in Q2 2025 from N9.38 trillion in Q1, though July saw a sharp 245.3% monthly decline to N6.63 trillion from N1.92 trillion in June, reflecting tighter interbank liquidity.
The CBN’s aggressive liquidity management included selling N11.53 trillion in Open Market Operations (OMO) treasury bills in 2025, a 75.2% increase from N6.58 trillion in 2024. This mop-up strategy, alongside high interbank borrowing costs, with the Open Buy Back (OBB) rate rising to 31.6% by July 2025 from 25.75% in 2024, underscores efforts to curb excess liquidity amid inflationary pressures (22.22% in June). The banking sector’s dynamics, bolstered by ongoing recapitalization, highlight Nigeria’s push for financial stability despite challenges like naira volatility (N1,565/$1 in the parallel market).
