Banks Deposit ₦3 Trillion with CBN Amid Cash Crunch as Liquidity Tightens Across Nigeria’s Financial System
Nigerian banks have increased the amount of money held with the Central Bank of Nigeria (CBN), raising total deposits at the apex bank’s Standing Deposit Facility (SDF) to around ₦3 trillion in October 2025. This move comes as the nation’s financial system faces a tightening cash flow, leaving businesses and borrowers with less liquidity for daily transactions.
The SDF allows banks to park excess funds with the CBN and earn modest interest. With lending risks rising and credit demand slowing, banks have opted for safer, risk-free returns rather than extending loans. According to recent market data, deposits under the SDF rose 21.5% month-on-month — about 64 times higher than borrowing through the Standing Lending Facility (SLF).
Despite the surge in deposits, liquidity conditions in the financial sector worsened. The average system deficit widened by 25.7% to ₦2.7 trillion in October, compared to ₦2.1 trillion the previous month. Market sources noted that liquidity distribution remained uneven, with only a few banks maintaining strong surpluses while others struggled with tight funding.
Analysts say the CBN’s higher deposit rates have encouraged banks to hold money at the apex bank rather than channel funds into the economy. Meanwhile, the central bank intensified its liquidity-mopping efforts through open market operations (OMO), issuing about ₦3.6 trillion in October — a sharp reversal from net redemptions in September. This move is part of efforts to stabilize short-term rates and control inflationary pressures.
Despite the squeeze, interbank lending rates remained relatively stable. The Overnight Policy Rate (OPR) held at 24.5%, while the Overnight Rate (OVN) slipped slightly to 24.9%. With Treasury and OMO yields adjusting lower due to strong investor demand, traders expect a more bullish outlook through November as attention turns to the year’s final Monetary Policy Committee (MPC) meeting — where the CBN’s next steps on interest rates could define the market’s direction into year-end.
source: The Sun