Amid Liquidity Surge, Banks’ Deposits with CBN Hit Record N128.9tn in March

Kayode Tokede

Nigerian banks’ deposits with the Central Bank of Nigeria (CBN) surged to an all-time high of N128.9 trillion in March 2026, underscoring mounting excess liquidity in the financial system and a growing preference for risk-free returns.
Latest data obtained from the CBN showed that the March figure represents a sharp 110.96 per cent increase compared with N61.11 trillion recorded in February 2026.

The surge was a reflection of an aggressive deployment of surplus funds by deposit money banks into the apex bank’s Standing Deposit Facility (SDF), a window that offers overnight interest on idle liquidity.
Further analysis indicated that banks had earlier deposited N52.6 trillion in January 2026, representing a staggering increase of about 460 per cent from N9.39 trillion in January 2025.

Cumulatively, banks placed an estimated N242.63 trillion with the CBN in the first quarter of 2026, a dramatic rise of 1,162.2 per cent when compared with N19.22 trillion recorded in the corresponding period of 2025.
On a full-year basis, deposits climbed to N336.2 trillion in 2025, marking a 777.2 per cent increase from N38.33 trillion in 2024, highlighting the rapid expansion of liquidity in the banking system over the past year.
Market analysts attributed the surge to heightened credit risk concerns, as banks increasingly favour the safety of the CBN window over lending to the real sector amid prevailing economic uncertainties.

The development also reflects the impact of monetary policy adjustments by the apex bank, which recently retained the Monetary Policy Rate (MPR) at 26.5 per cent, while maintaining the asymmetric corridor at +50 and -450 basis points. This effectively makes the SDF window more attractive for banks seeking to park excess funds.

An investment banker and stockbroker, Mr. Tajudeen Olayinka, explained that uncertainty in the business environment has continued to limit the availability of creditworthy borrowers, prompting banks to adopt a cautious lending approach.
According to him, “When viable prime borrowers are limited, banks either reprice risk for other borrowers or turn to safer short-term instruments. In the absence of sufficient bankable opportunities, they resort to interbank placements and the CBN’s standing deposit window.”

He noted that the spike recorded in March was largely driven by banks taking advantage of relatively attractive returns at the SDF window to preserve liquidity.
Olayinka added that the CBN is aware of the trend and has deliberately maintained the lower bound of the interest rate corridor at -450 basis points around the MPR to encourage banks to channel excess liquidity into the regulator rather than engage in risky lending.

He linked banks’ cautious stance to broader global and domestic uncertainties, including ongoing geopolitical tensions in the Middle East, which continue to impact energy markets and heighten macroeconomic risks.
“The implication is that banks will continue to find comfort in the CBN window, which helps stabilise the financial system and supports exchange rate management by sustaining foreign portfolio inflows,” he said.

He, however, warned that the trend could have broader implications for the economy, including constrained credit to the real sector, sustained high interest rates, and delayed progress in reducing inflation to single-digit levels.
According to him, while non-performing loans may remain under control as banks focus on quality lending, businesses in need of long-term capital may increasingly turn to the debt capital market for funding.

He added that economic growth could face headwinds as firms and households grapple with the high cost of borrowing and rising living expenses.