Deposits by Nigerian banks with the Central Bank of Nigeria (CBN )grew by a staggering 907.3 percent year-on-year (YoY) to N68.9 trillion in the first half of 2025 (H1’25), up from N6.84 trillion in the same period of 2024 (H1’24), signalling significant excess liquidity in the financial system.
The surge reflects banks’ growing use of the CBN’s Standing Deposit Facility (SDF), through which the apex bank accepts overnight deposits from commercial banks at an interest rate of the Monetary Policy Rate (MPR) minus 100 basis points.
According to CBN data, banks placed N19.22 trillion in deposits under the SDF in the first quarter of 2025 (Q1’25), representing a 956 percent jump from N1.82 trillion in Q1’24. In the second quarter (Q2’25), deposits spiked further to N49.68 trillion, an 889.6 percent increase from N5.02 trillion in Q2’24.
The surge in SDF activity followed the CBN’s shift to a single-tier remuneration policy last year, under which all SDF deposits earn interest at MPR minus 100 basis points. With the MPR currently at 27.5 percent, the effective interest on SDF is 26.5 percent.
While deposits surged, commercial banks also increased their borrowing from the CBN, albeit at a much slower rate. Borrowings through the Standing Lending Facility (SLF) rose by 3.04 percent YoY to N59.84 trillion in H1’25 from N58.07 trillion in H1’24.
A breakdown shows that banks borrowed N50.46 trillion via SLF in Q1’25, marking a 61 percent increase from N31.25 trillion recorded in Q1’24.
The SLF allows banks to access short-term funds from the CBN at a cost of MPR plus 500 basis points, while another short-term borrowing option is the Repurchase (Repo) facility, where banks sell securities to the CBN with an agreement to buy them back at a future date, typically at a premium.
During the period, the apex bank also intensified its liquidity management efforts through the sale of Open Market Operation (OMO) Treasury Bills (TBs). The CBN sold N8.05 trillion worth of OMO bills in H1’25, up 27.3 percent from N6.32 trillion sold in H1’24.
Despite these liquidity mop-up operations, funding costs in the interbank money market trended lower. The average interest rate on Open Buy Back (OBB) lending dropped to 27 percent at the end of June 2025, down from 29 percent in June 2024.
Analysts attribute the high deposit volumes and lower interbank rates to the excess liquidity in the system, driven by elevated government spending, maturing securities, and limited lending opportunities in the private sector
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