Nigerian banks’ deposits with the Central Bank of Nigeria (CBN) have surged by an astonishing 1,578% year-on-year (YoY) to N53.5 trillion in the first five months of 2025. This dramatic increase, from N3.19 trillion in the corresponding period of 2024, is a clear indicator of significant excess liquidity within the banking system.
The CBN employs various short-term facilities for banks to manage liquidity. Its lending windows include the Standing Lending Facility (SLF), where banks can borrow at an interest rate of 500 basis points (bpts) above the Monetary Policy Rate (MPR), and Repurchase (Repo) agreements, involving the purchase of banks’ securities with a buy-back agreement at a higher price.
Conversely, the CBN accepts deposits from banks through its Standing Deposit Facility (SDF), paying an interest rate of MPR minus 100 bpts.
Deposit Trends Highlight Liquidity Surplus
Analysis of the trend shows a consistent rise in deposits:
In the first quarter of 2025, banks deposited N19.22 trillion, a 956% YoY increase from N1.82 trillion in Q1 2024.
April 2025 saw SDF deposits climb to N16.75 trillion, a staggering 3,793% jump from N428.98 billion in April 2024.
By May 2025, these deposits grew by 1,761% YoY to N17.55 trillion from N943.1 billion in May 2024.
This robust patronage of the SDF underscores the surplus liquidity in the banking system, largely attributed to the CBN’s shift to a single-tier remuneration structure for the SDF last year. This policy mandates that all SDF deposits are remunerated at MPR minus 100 basis points, translating to an SDF rate of 26.5% with the current MPR at 27.5%.
Borrowing from CBN Shows Mixed Trends
While deposits have soared, banks’ borrowing through the SLF presents a mixed picture:
In the first five months of 2025, SLF borrowing rose by 6.8% YoY to N57.98 trillion from N54.29 trillion in 5M 2024.
Q1 2025 saw a 61% YoY increase in SLF borrowing to N50.46 trillion from N31.25 trillion in Q1 2024.
However, April 2025 witnessed a significant decline in borrowing, with banks taking N4.5 trillion, a 170% YoY decrease from N12.17 trillion in April 2024.
This downward trend continued in May 2025, where borrowing from the CBN dropped by 81% YoY to N2.02 trillion from N10.87 trillion.
