Banks’ Deposits with CBN Soar 783% to N79.8trn

Punchngs July 29, 2025

Banks’ Deposits with CBN Soar 783% to N79.8trn

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02.08.2025
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Banks’ deposits with the Central Bank of Nigeria (CBN) rose sharply by 783.7 percent year-on-year (YoY) to N79.8 trillion in the first seven months of 2025 (7m’25), up from N9.03 trillion recorded in the same period of 2024 (7m’24), highlighting significant excess liquidity in the banking sector.

The CBN operates two short-term lending instruments for banks: the Standing Lending Facility (SLF) and the Repurchase (Repo) lending arrangements.

Under the SLF, the CBN lends money to commercial banks at an interest rate of 500 basis points above the Monetary Policy Rate (MPR). Meanwhile, the Repo lending allows banks to sell securities to the CBN with an agreement to repurchase them later at a premium.

Conversely, the apex bank accepts deposits through the Standing Deposit Facility (SDF), paying interest at MPR minus 100 basis points.

SDF Trends and Liquidity Indicators

Trend analysis showed that deposits through the SDF surged by 158.4% quarter-on-quarter (QoQ) to N49.68 trillion in Q2 2025, compared to N19.22 trillion in Q1 2025.

In July 2025 alone, banks deposited N10.9 trillion—a 29.2% decline from the N15.4 trillion recorded in June. This substantial use of the SDF facility signals ample liquidity in the banking system, further driven by CBN’s shift to a single-tier remuneration system last year.

Under this policy, all SDF deposits earn MPR minus 100bps. With the current MPR at 27.5%, the applicable interest rate for SDF is 26.5%.

Table of Contents

Borrowing Trends: SLF Usage Falls

While deposits soared, borrowing by banks via SLF declined 11.6% YoY to N66.47 trillion in 7m’25 from N75.19 trillion in 7m’24.

However, on a quarterly basis, banks’ SLF borrowing rose sharply by 61% QoQ to N50.46 trillion in Q2 2025 from N9.38 trillion in Q1 2025. In July alone, SLF borrowing stood at N6.63 trillion, representing a 245.3% increase from N1.92 trillion in June 2025.

Liquidity Constraints and CBN’s Actions

The drop in overall borrowing from the CBN reflects persistent liquidity constraints in the interbank money market. To address this, the apex bank actively conducted liquidity mop-up operations through the sale of Open Market Operations (OMO) instruments and Treasury Bills (TBs).

Conclusion

The significant surge in banks’ deposits with the CBN is a strong indicator of current liquidity dynamics and policy effectiveness. While high SDF uptake shows excess liquidity, the decline in SLF borrowing and aggressive OMO sales suggest a tightening monetary environment. Market watchers will continue to assess how these trends impact credit availability, inflation, and economic growth.

In a significant development that highlights a shift in liquidity patterns within Nigeria’s financial system, the Central Bank of Nigeria (CBN) has revealed that banks’ deposits with it have soared by an astonishing 783% to ₦79.8 trillion as of July 2025. This surge reflects growing caution among commercial banks as well as strategic liquidity management measures implemented by the apex bank.The dramatic increase, according to CBN data, is largely driven by recent monetary policy reforms aimed at curbing inflation, stabilizing the naira, and tightening liquidity to protect the financial system from excess cash flow. Financial analysts attribute the surge to higher cash reserve requirements and the implementation of the Standing Deposit Facility (SDF), which allows banks to deposit excess fCBN at aunds with the set interest rate.

In response to persistent inflationary pressure and naira volatility, the CBN has maintained a hawkish stance, frequently adjusting the Monetary Policy Rate (MPR) and enforcing stricter control over banking liquidity. This has compelled commercial banks to increase their placements with the apex bank, reducing the amount available for lending to the real sector.

An industry expert, Mr. Bamidele Iroko, a financial analyst at Lagos-based InvestScope Advisory, said the spike in deposits signals a cautious banking environment. “Banks are preferring to park excess liquidity with the CBN rather than expose themselves to risky lending,” he explained. “It’s also a sign that monetary tightening is biting hard and banks are playing safe.”

However, the rise in deposits also raises questions about lending capacity and economic stimulation. Experts warn that while the increase shows strong capital controls, it could slow credit expansion, particularly for small and medium-sized enterprises (SMEs), which rely heavily on commercial banks for funding.

The ₦79.8 trillion figure includes both statutory reserves and voluntary placements by banks, signifying both compliance and strategic investment. The CBN has remained firm in its mission to use monetary tools to manage inflation, with inflation rates still hovering around double digits.

As the apex bank continues to monitor liquidity in the economy, analysts are keenly watching how this trend affects credit growth, interest rates, and investment inflows. With Nigeria seeking sustainable economic growth amid global financial uncertainties, balancing liquidity management and credit expansion will remain a major challenge for the CBN in the months ahead.