The Central Bank of Nigeria (CBN) conducted aggressive liquidity sterilisation operations between February 17 and February 19, 2026, withdrawing more than N3.57 trillion from the banking system as deposit money banks continued to deposit substantial excess cash into the Standing Deposit Facility (SDF).
The SDF serves as an overnight deposit window where commercial banks park surplus liquidity, earning an attractive risk-free rate of approximately 22.8% based on FMDQ data. This tool allows the apex bank to manage system liquidity effectively amid persistently high balances and strong appetite for government securities.
CBN financial statistics for the period reveal a combination of Open Market Operations (OMO), primary market sales of treasury bills and bonds, and sustained SDF placements driving the absorption. The operations came against a backdrop of elevated banking system liquidity, which analysts at Coronation Research had previously highlighted as exceeding N4 trillion in mid-February.
System liquidity strengthened notably midweek, closing at N4.32 trillion by Friday, February 20, while SDF placements surged from N2.52 trillion at the week’s start to N4.26 trillion. Daily SDF usage remained robust, with banks maintaining nearly N3 trillion in average placements—peaking at N3.35 trillion on February 17 and settling around N2.97 trillion on February 19—despite concurrent mop-up efforts.
Key daily movements included:
– On February 17, net liquidity absorption of about N435 billion resulted from OMO sales of N2.30 trillion offset by N1.87 trillion in maturing instruments.
– On February 19, treasury bills and bond issuances totalled N1.91 trillion against N765.89 billion in repayments, yielding a net withdrawal of roughly N1.14 trillion.
These direct market instruments contributed approximately N1.57 trillion to the overall sterilisation, complementing the heavy reliance on the SDF to reinforce control over excess reserves.
Experts interpret the high liquidity environment as stemming from structural factors rather than immediate funding distress. Standing Lending Facility (SLF) usage stayed minimal, and opening balances remained modest relative to policy absorptions, indicating surplus rather than shortage.
Coronation Research analysts noted in their weekly update that “liquidity conditions strengthened notably from midweek,” with SDF placements rising “markedly… reflecting elevated surplus reserves in the banking system.” Olubunmi Ayokunle, Head of Financial Institutions Ratings at Augusto & Co., remarked that “there’s nothing bad in having liquidity in the system, but it must be at a particular level.” He attributed the build-up to historically elevated Federation Account Allocation Committee (FAAC) distributions, residual effects of past Ways and Means advances, and gradual economic recovery, where project funds often recirculate into the banking system.
The CBN’s proactive approach underscores its commitment to maintaining monetary stability, curbing potential inflationary pressures from excess cash, and supporting the broader policy framework. As banks favour the safe, remunerative SDF option over riskier lending amid economic uncertainties, the apex bank’s liquidity management tools remain central to balancing system dynamics and fostering controlled credit expansion.
