Nigerian commercial banks have dramatically ramped up their deposits with the Central Bank of Nigeria (CBN), reaching a historic sum of ₦50.73 trillion in September 2025. This unprecedented flow of funds into the CBN’s coffers occurred via the Standing Deposit Facility (SDF), a mechanism that allows banks to place their excess cash reserves with the apex bank overnight in exchange for interest.
The staggering sum signifies a massive 992 per cent year-on-year increase from the ₦4.65 trillion recorded in September 2024, confirming a period of significant surplus liquidity within the banking sector. The sharp contrast with the borrowing activities of banks further underscores this trend. Data shows that the amount borrowed by banks from the CBN through the Standing Lending Facility (SLF)—the window used to access emergency funds—plunged to a mere ₦322 million during the month under review. This represents a near-total collapse in borrowing, marking a 99.99 per cent decline from the ₦7.86 trillion borrowed in the corresponding period the previous year.
Viewing the trend across the year, the nine-month period ending in September 2025 saw a total of ₦146.2 trillion deposited with the CBN, a 532 per cent surge compared to ₦23.12 trillion in the first nine months of 2024. Simultaneously, total borrowing by banks has fallen by 21 per cent, dropping from ₦87.08 trillion to ₦68.43 trillion over the same period.
Driven by Policy and High Yields
A key catalyst for this unprecedented deposit volume is the CBN’s recent shift in monetary policy. Amid efforts to tackle inflation and manage liquidity, the central bank removed the remunerable cap on the SDF in 2024. This policy change was a deliberate attempt to encourage activity in the SDF window.
Under the current framework, the CBN shifted to a single-tier remuneration structure where all deposits earn a high, attractive rate: the Monetary Policy Rate (MPR) minus 100 basis points. Following the MPC’s decision to maintain a high MPR, this policy has created a highly lucrative, risk-free investment alternative for commercial banks, confirming that deposit money banks (DMBs) are actively searching for better yields in a volatile economic landscape.
Experts Attribute Surge to Risk Aversion
Investment bankers and financial analysts widely attribute the surge in deposits to a profound sense of uncertainty and risk aversion in the wider Nigerian business environment.
Mr. Tajudeen Olayinka, an Investment Banker and Stockbroker, pointed to several contributing factors, including “the increasing level of threat in the environment of business in Nigeria, arising from: insecurity, supply chain problems, rising inflation and poor purchasing power, low level of productivity, rising unemployment, liquidity overhang and paucity of risk-free financial instruments.”
He elaborated that banks are hesitant to extend credit to businesses that are struggling to survive. Consequently, many banks would prefer to incur a penalty for falling short of the required Lending-to-Deposit Ratio (LDR) limit rather than extending new loans, demonstrating a clear preference for stringent risk management.
Mr. Ambrose Omordion, the Chief Operating Officer of InvestData Consulting Limited, added that the CBN has effectively become the last resort for DMBs to deposit excess liquidity due to the attractive yields. He noted that the low level of borrowing suggests stability in the banking sector and a strong capital base for most banks. Furthermore, the high interest offered on SDF deposits serves as a dual advantage: it is both an effective preventive measure against Non-Performing Loans (NPLs) and an alternative source for banks to maximise profitability.
While the strong patronage of the SDF confirms healthier liquidity and stability within the financial system, the overwhelming concentration of funds with the CBN raises concerns about its impact on the nation’s economic growth. Critics suggest that despite the regulatory push for lending, the attractiveness of the risk-free returns may be diverting crucial credit away from the ‘real sector’—the productive businesses essential for job creation and economic expansion.
