Nigerian banks dramatically increased their deposits with the Central Bank of Nigeria by 907.3 per cent year-on-year to N68.9 trillion in the first half of 2025 (H1’25), up from N6.84 trillion in the same period last year (H1’24), signaling excess liquidity in the banking system.
The CBN’s Standing Deposit Facility, which accepts bank deposits at an interest rate of Monetary Policy Rate minus 100 basis points (currently 26.5%), saw massive inflows. First quarter 2025 (Q1’25) deposits hit N19.22 trillion – a 956% YoY jump from N1.82 trillion in Q1’24. Second quarter (Q2’25) deposits reached N49.68 trillion, up 889.6% from N5.02 trillion in Q2’24.
“This strong SDF patronage reflects both the banking system’s liquidity surplus and the impact of the CBN’s single-tier remuneration structure introduced last year,” a financial analyst noted. The policy standardized SDF remuneration at MPR minus 100bps, currently yielding 26.5% with MPR at 27.5%.
Conversely, banks’ borrowing through the CBN’s Standing Lending Facility – priced at MPR plus 500bps – grew modestly by 3.04% YoY to N59.84 trillion in H1’25. Q1’25 saw a 61% YoY increase to N50.46 trillion, while Q2’25 borrowing dropped 65% YoY to N9.38 trillion.
The CBN aggressively mopped up liquidity through Open Market Operations, selling N8.05 trillion in Treasury Bills during H1’25 – a 27.3% increase from N6.32 trillion in H1’24.
Despite these measures, interbank lending rates eased, with the Collateralized (Open Buy Back) rate declining to 27% in June 2025 from 29% a year earlier, indicating persistent system liquidity.
“The CBN continues balancing monetary operations through its dual window system – the SDF for deposits and SLF/Repo for short-term lending to banks,” a banking sector expert explained. “The explosive deposit growth suggests banks prefer parking funds at the CBN rather than riskier lending amid current economic uncertainties.”
