*The Central Bank of Nigeria’s data indicates that commercial banks deposited N89.3 trillion through the Standing Deposit Facility June 2026, compared to N87.13 trillion in May and N92.32 trillion in April this year
Alexander Davis | ConsumerConnect
Nigerian banks’ deposits with the Central Bank of Nigeria (CBN) declined by 1.14 percent month-on-month to N82.99 trillion August 2026, from N83.96 trillion recorded July, new data from the banking sector regulator has revealed.
The Deposit Money Banks (DMBs) banks deposit excess liquidity with the CBN through the Standing Deposit Facility (SDF), thereby earning interest on overnight deposits.
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According to the CBN’s financial data, the N82.99 trillion recorded in August represented the third-lowest monthly SDF placement by banks so far in 2026.
The moderation in banks’ deposits with the Bankers’ Bank came amid the reduction in the Monetary Policy Rate (MPR) to 26.50 percent February 2026 from 27 percent in 2025, as well as changing liquidity conditions and banks’ search for attractive returns on available funds.
The Monetary Policy Committee (MPC), in 2026, has retained the Standing Facilities Corridor around the MPR at +50/-450 basis points.
CBN data also showed that banks deposited N89.3 trillion through the SDF June, compared to N87.13 trillion in May and N92.32 trillion in April.
Deposits reached their highest level so far this year in March, at N128.92 trillion. In February, they stood at N61.11 trillion, representing an increase of 16.18 percent from N52.6 trillion recorded January.
The data further indicated that overall, banks deposited estimated N678.36 trillion with the CBN in the first eight months of 2026.
This represents an increase of about 610.58 percent, compared with N95.47 trillion recorded in the corresponding period of 2025.
Banks deposited estimated N336.2 trillion with the CBN 2025, representing a 777.2 percent year-on-year increase from N38.33 trillion 2024, according to report.
Analysts at Cordros Research, in a report following the November 24-25 MPC meeting, had stated the adjustment of the asymmetric corridor to +50/-450 basis points, from +250/-250 basis points previously, led to lower rates for the Standing Lending Facility (SLF) and SDF. Newspapers
The analysts opined that the adjustment reduced the SLF rate to 27.5 percent from 29.5 per cent and the SDF rate to 22.5 percent from 24.5 percent.
The market experts also said: “The adjustment is expected to ease monetary conditions and strengthen banks’ private sector credit expansion.”
Mr. David Adnori, Vice-President, Highcap Securities, said the decline in deposits with the CBN did not necessarily suggest that banks had become less liquid.
Adnori said: “A drop in CBN deposits does not necessarily mean banks become less liquid.
“It can mean that excess liquidity was being converted into loans or securities or was absorbed by the CBN.”
Mr. Ambrose Omordion, Chief Research Officer at Investdata Consulting Limited, was quoted to have said banks remained cautious about lending due to concerns over non-performing loans (NPLs).
According to him, difficulties some customers encountered in servicing loans had encouraged banks to favour relatively safer investment options.
Omordion stated: “The interest rate in the financial sector is high, and lending to customers becomes a major challenge.
“This alone has contributed to banks depositing with the CBN and investing in fixed-income instruments, where the risk is relatively low, and returns are assured.”
The Chief Research Officer at Investdata Consulting, also said: “If we see further rate cuts by the CBN, that alone may encourage banks to lend more to the real sector and reduce the volume of excess liquidity deposited with the CBN.
“However, we expect the real sector to benefit from the banks’ recapitalisation exercise, while supporting the Federal Government’s aspiration to build a $1 trillion economy.”
Speaking on the development, Mr. Tajudeen Olayinka, Investment banker and stockbroker, said the prevailing high interest-rate environment, credit risks and broader economic uncertainty had strengthened banks’ preference for relatively safe placements with the CBN.
He further noted: “With high benchmark rates for lending and borrowing, and concerns about credit risk and economic uncertainty, banks may prefer the relative safety of the SDF. It offers them a known return rather than extending credit into uncertain territory,” he said.
The sharp increase in banks’ SDF placements with the CBN, Olayinka said, reflected a deeper tension between abundant liquidity in the financial system and reluctance to expand lending.
He stated: “It captures a deeper tension between liquidity abundance and lending reluctance in the financial system.
“Beneath the numbers lies a complex web of caution, policy tightening and an economy grappling with uncertainty.
“Banks are not acting irrationally. They are responding to signals from an environment marked by high inflation, exchange-rate volatility and weak consumer confidence.”
The prevailing tight monetary environment has continued to make relatively risk-free placements with the CBN attractive to banks, he said.
Olayinka added: “Faced with this reality, banks prefer to earn relatively risk-free returns by placing funds with the CBN rather than extending credit to businesses struggling under heavy input costs and uncertain demand.”