SDF: Banks’ Deposits With CBN Reached Historic N50.73trn in September

Kayode Tokede

Amid excess liquidity in the financial sector, banks’ deposits with the Central Bank of Nigeria (CBN) increased to a historical sum of N50.73 trillion in September 2025 with N322 million borrowed from the apex bank in the period under review.

Banks use Standing Deposit Facility (SDF), to deposit their excess funds overnight with the CBN for an interest.

Banks use another window, the Standing Lending Facility (SLF), an upper corridor to borrow money from the CBN at a pre-specified rate, typically the benchmark policy rate plus a margin.

Analysis of financial data from the CBN revealed that banks’ deposits has appreciated significantly by 992 per cent Year-on-Year (YoY) from N4.65 trillion in September 2024 to N50.73 trillion in September 2025.

The data also showed that banks’ deposit since the beginning of the year has witnessed a steady increase, reaching its highest peak in September 2025.

A further breakdown of the numbers showed that the N17.54 trillion that was deposited in May 2025 was the second highest amount banks deposited with CBN.

The N322 million banks borrowed from CBN in the month under review represents 99.99 per cent YoY decline when compared to N7.86 trillion in the corresponding period of 2024.

In the nine months of 2025, a sum of N146.2 trillion was deposited with CBN, representing 532 per cent YoY increase from N23.12 trillion in nine months of 2024.

Further analysis showed that the total amount borrowed by banks has dropped significantly to N68.43 trillion in nine months of 2025, about 21 per cent decline from N87.08 trillion reported by the CBN in nine  of  2024.

The applicable rates for the SDF and SLF in 2023 increased by 50 basis points to 11.50 and 19.50 per cent, respectively, following the hike in the policy rate by 50 basis points to 18.75 per cent in June 2023.

The interest rate at which these banks borrow from CBN changed in 2024 amid the Monetary Policy Committee (MPC) hike in MPR or interest rate.

In 2024, the MPC members voted to increase interest rate from 18.75 per cent to 27.50 per cent amid its mandate to tackle inflation rate and unstable Naira at the foreign exchange market. However, the MPC members of the CBN towards the end of September 2025 voted to reduce MPR by 50 basis points to 27 per cent, marking a significant shift to an expansionary monetary policy.

This move, which comes amid five consecutive months of sustained disinflation, aims to boost economic activity and address liquidity issues in the banking system. The decision was influenced by the fall in the inflation rate from 21.88 per cent in July to 20.12 per cent in August 2025.

In 2024, the CBN shifted to a single-tier remuneration structure for the SDF. Previously, deposits up to a certain threshold, for example N3 billion, earned a higher interest rate, while amounts exceeding that threshold earned a lower rate.

Under the new policy, all SDF deposits are remunerated at the MPR minus 100 basis points. With the current MPR at 27.0 per cent, this results in an SDF rate of 24.5 per cent.

In 2024, THISDAY had reported that banks deposit to CBN increased significantly to N38.12 trillion, about 210.15 per cent increase when compared to N12.29 trillion in 2023.

SDF in 2024 witnessed significant patronage as banks and merchant banks deposit reached highest peak of about N8.12 trillion in August 2024

The increase is coming on the backdrop of CBN removal of the cap on the remunerable policy, among others.

The CBN governor, Mr. Olayemi Cardoso had disclosed that the apex bank removed the cap on the remunerable SDF to increase activity in the SDF window and manage liquidity.

CBN had maintained that the strong patronage at the SDF confirmed healthier liquidity in the banking system, stressing that banks and merchant banks were in search of better yields.

The current inflation rate in Nigeria is above yield on Treasury bills (T-Bills) and DMBs are looking for risk-free investments, which SDF has provided since MPR hike.

Commenting, Investment Banker & Stockbroker, Tajudeen Olayinka, attributed the surge in banks deposit with CBN to uncertainty in the business environment over rising insecurity, among others.

According to him, “The most significant factor is 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 added that, “As a result, most banks prefer to be debited by CBN for running short of LDR limit, as against extending credit to businesses that are finding it difficult to survive. It is all about managing risk.”

On his part, the Chief Operating Officer of InvestData Consulting Limited, Mr. Ambrose Omordion stated that CBN is the last resort where DMBs deposit excess liquidity that comes with an attractive yield.

He explained, “When a bank goes to borrow from CBN, it is a sign the bank is having liquidity challenges. The latest report by CBN revealed stability in the banking sector and most of them have a strong capital base to lend to the real sector and expand.

“The LDR policy of CBN is meant to encourage banks to lend to the real sector and of recent, the private sector lending has witnessed a trajectory and a bit of disruption due to a hike in global interest has slowed down customers borrowing from the banks. The hike in interest rate has impacted the cost of funds which is expected to change the direction on who banks lend to customers.

“For me, the improvement in deposit with CBN is a sign that these banks have enough liquidity and are taking preventive measures to checkmate Non-performing Loans (NPL). In addition, the high interest of seven per cent depositing with CBN is also another alternative for banks to make more money and improve on profitability.”