Amidst Sluggish Economic Activity, Banks Deposit N33.05trn With CBN in 16-Days
Kayode Tokede
Following the slow start to business activities in 2026, which has further raised credit risk temperature, banks deposited an estimated N33.05 trillion with the Central Bank of Nigeria (CBN) in the first 16-days of 2026.
This is according to financial data for the first 16-days of 2026 released by the CBN. The CBN numbers revealed that banks deposited more cash than they borrowed to underline excess liquidity in the financial sector.
The deposit, which is far below the N63.93 trillion in December 2025, was also fuelled by uncertainty in the domestic/foreign economy and excess liquidity in the financial sector, higher interest incentives, and risk-averse lending behaviour.
THISDAY had exclusively reported last week that banks closed 2025 with N336.2 trillion total deposit with the CBN about 777.2 per cent Year-on-Year (YoY) increase over N38.33 trillion deposited in 2024.
Banks deposit excess cash with the CBN using the Standing Deposit Facility (SDF) window. The apex bank lends the funds to banks in need of urgent liquidity through its Standing Lending Facility (SLF) window.
The data revealed that banks borrowed an estimated N1.07 trillion in the first 16-days of 2026 against N157 billion borrowed in December 2025.
The mixed behavior between deposit and lending by CBN to banks showed that although system liquidity was strengthening, some institutions still required overnight support to rebalance their books and lend to the real sector.
Analysts attributed the growth in banks deposit to high credit risk concerns and a preference for the safety of the regulator window rather than lending into the real sector.
Amid drop in MPR to 27 per cent in 2025, the CBN adjusted the standing facilities corridor around the MPR to +50basis points/-450basis points from the previous: +250basis -250basis points.
Cordros Research in a report after the November 24-25 Monetary Policy Committee (MPC) meeting stated that, “Contrary to our expectations of a 100basis points reduction, the MPC retained the MPR at 27per cent, despite the sharper disinflationary outturn in recent months and the appreciation of the naira.
“According to the MPC, inflation remains elevated at double-digit levels, underscoring the need to keep interest rates high to strengthen the disinflationary trend. However, the Committee signalled an easing bias by adjusting the asymmetric corridor to +50/-450basis points (Previous: +250basis points/-250basis points) around the MPR.
“This indicates a reduction in interest rates for the SLF and the SDF to 27.5per cent (Previous: 29.5per cent) and 22.5per cent (Previous: 24.5per cent), respectively. The adjustment is expected to ease monetary conditions and strengthen banks’ private sector credit expansion.
“Going into 2026, we expect inflation to continue easing as key drivers unwind, including sustained naira stability, better harvest outcomes and relatively stable petroleum prices. Nonetheless, in line with the MPC’s price stability goal and given that inflation is likely to remain in double digits in 2026, we believe the pace of interest rate cuts will likely remain measured.”
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 MPC hike in monetary policy rate (MPR).
Commenting on the development, Investment Banker & Stockbroker, Mr. Tajudeen Olayinka stated, “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 explained that the sharp surge in Nigerian SDF placements with the CBN is more than a fleeting statistic.
“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,” he added.
On his part, the Vice President, Highcap Securities Limited, Mr. David Adnori, said; “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,”
According to him, the CBN’s aggressive monetary tightening, with the MPR held at 27per cent, has made the SDF rate of about 25.75per cent particularly attractive.
“Faced with this reality, banks prefer to earn nearly risk-free returns by placing funds with the CBN rather than extending credit to businesses struggling under heavy input costs and uncertain demand,” he explained.
