Banks’ Deposits with CBN Surge 730% to N67.72trn, Reflecting Excess Liquidity Amid Economic Uncertainty
In the first half of 2025, Nigerian banks’ deposits with the Central Bank of Nigeria (CBN) soared to N67.72 trillion, marking a 730% year-on-year increase from N8.15 trillion in the same period in 2024. This unprecedented surge signals a buildup of excess liquidity in the banking sector as commercial banks avoid lending to the real economy, citing economic risks such as insecurity, inflation, weak consumer demand, and supply chain challenges. Instead, banks are parking their funds with the CBN’s Standing Deposit Facility (SDF), which currently offers a 26.5% interest return—100 basis points below the Monetary Policy Rate (MPR) of 27.5%.
Throughout 2025, banks continued to shift more liquidity into the SDF window. In April alone, deposits through SDF jumped 3,793% year-on-year to N16.75 trillion, with May and June recording N17.55 trillion and N14.2 trillion respectively. In contrast to increased deposits, commercial lending remained subdued due to rising risks of non-performing loans. The reluctance to lend reflects growing fears among financial institutions, preferring secure returns from the apex bank over volatile lending environments.
The CBN’s removal of the cap on remunerable SDF and the introduction of a flat 26.5% rate in 2024 further incentivized banks to boost deposits. This policy shift, communicated via an official circular, aimed to manage liquidity and provide more attractive yields to deposit money banks (DMBs). Experts say the appeal of safe, high-yield placements at CBN far outweighs the risk of issuing new credit in Nigeria’s currently fragile business landscape.
According to analysts like Tajudeen Olayinka and Ambrose Omordion, banks are prioritizing risk management over expansion. Olayinka attributes the trend to mounting macroeconomic instability, while Omordion suggests that high SDF interest rates and strong capital bases encourage banks to use the CBN facility as a strategic tool to avoid non-performing loans while ensuring profitability. Despite regulatory policies like the Loan-to-Deposit Ratio (LDR), many banks opt to face CBN penalties rather than risk volatile sector lending.
Meanwhile, CBN’s Standing Lending Facility (SLF) window showed mixed usage. Although total borrowing rose slightly by 1.44% YoY to N58.91 trillion in H1 2025, monthly breakdowns reflect steep declines in April, May, and June compared to 2024. This suggests that banks are less reliant on borrowing from the CBN for liquidity and more focused on strategically placing funds through SDF, highlighting a defensive stance amidst persistent economic headwinds.
Source: This day