Banks’ Deposits with CBN Surge 783% to ₦79.8 Trillion Amid Excess Liquidity and Tight Interbank Market
Banks’ deposits with the Central Bank of Nigeria (CBN) soared by 783.7% year-on-year to ₦79.8 trillion in the first seven months of 2025, compared to ₦9.03 trillion during the same period in 2024. This unprecedented spike points to excess liquidity in the financial system. The CBN operates short-term lending and deposit facilities, Standing Lending Facility (SLF) and Standing Deposit Facility (SDF)—to manage bank liquidity. While deposits through SDF have surged, borrowings via SLF have declined.
The Standing Deposit Facility attracted heavy patronage, rising by 158.4% quarter-on-quarter to ₦49.68 trillion in Q2 2025 from ₦19.22 trillion in Q1. This surge is linked to the CBN’s 2024 shift to a single-tier remuneration policy, which pays banks interest at MPR minus 100 basis points (currently 26.5%). Monthly deposits, however, dipped by 29.2% in July compared to June, indicating slight volatility in liquidity preference.
On the lending side, banks’ borrowing through the SLF dropped 11.6% year-on-year to ₦66.47 trillion in the first seven months of 2025. However, quarter-on-quarter, borrowings spiked significantly by 61% in Q2 compared to Q1, pointing to short-term liquidity needs. Despite this, July borrowings dropped drastically by 245.3% to ₦6.63 trillion from June’s ₦1.92 trillion.
The decline in net borrowing indicates tighter liquidity in the interbank money market. This is driven by the CBN’s aggressive liquidity mop-up using Open Market Operations (OMO), through which it sold ₦11.53 trillion in treasury bills in the review period, a 75.2% increase from the previous year. This action was aimed at reducing excess money supply and curbing inflationary pressure.
Consequently, the cost of funds has risen sharply. The average interest rate on collateralized Open Buy Back (OBB) lending jumped to 31.6% in July 2025, from 25.75% in July 2024. These dynamics reflect a complex interplay between high system liquidity, cautious bank lending, tighter monetary policy, and rising market interest rates, all underlining the CBN’s ongoing effort to stabilize Nigeria’s financial system.
Source: Vanguard