Banks have significantly increased the amount of money they keep with the Central Bank of Nigeria (CBN), with total deposits rising to ₦53.5 trillion in the first five months of 2025. This represents a sharp increase of 1,578% compared to ₦3.19 trillion in the same period last year.
This trend points to a high level of liquidity in the banking system. The CBN offers two key short-term lending options to commercial banks: the Standing Lending Facility (SLF) and the Repurchase Agreement (Repo). The SLF allows banks to borrow money from the CBN at an interest rate that is 5 percentage points above the Monetary Policy Rate (MPR). In contrast, the Repo arrangement involves the CBN buying bank securities with an agreement to resell them at a later date at a higher price.
At the same time, banks also deposit money with the CBN through the Standing Deposit Facility (SDF). In return, they receive interest at a rate set at 100 basis points below the MPR. With the MPR currently at 27.5%, the interest rate for SDF deposits stands at 26.5%.
Between January and March 2025, banks deposited ₦19.22 trillion with the Central Bank of Nigeria (CBN), marking a 956% increase from ₦1.82 trillion in the first quarter of 2024. In April alone, deposits surged to ₦16.75 trillion, a 3,793% increase from ₦428.98 billion in April 2024. By May, banks had deposited another ₦17.55 trillion, representing a 1,761% increase from ₦943.1 billion in the same month last year.
While deposits surged, borrowing patterns showed a different story. From January to May 2025, total borrowing by banks through the SLF rose slightly by 6.8% to ₦57.98 trillion, up from ₦54.29 trillion during the same period in 2024. In the first quarter of 2025, SLF borrowings increased by 61% to ₦50.46 trillion from ₦31.25 trillion a year earlier.
However, borrowing dropped sharply in subsequent months. In April 2025, banks borrowed ₦4.5 trillion—a steep 170% decrease from the ₦12.17 trillion recorded in April 2024. May saw a further decline, with banks borrowing just ₦2.02 trillion, an 81% decrease from ₦10.87 trillion the previous year.
This sharp increase in deposits, coupled with a decline in demand for CBN loans, highlights a banking sector awash with cash. The shift in bank behavior is likely linked to the CBN’s policy change in 2024, which introduced a single-tier system for SDF remuneration. Under this structure, all deposits earn interest at the MPR minus 100 basis points, making the facility more attractive for banks seeking secure returns without the need for borrowing.
