Liquidity: Banks Deposit with CBN Drops by 6.02% MoM to N83.96trn

Kayode Tokede  

Following excess liquidity in the financial sector, banks and merchant banks’ deposits with the Central Bank of Nigeria (CBN) dropped by 6.02 per cent Month-on-Month (M-o-M) in July to N83.96 trillion as against N89.33 trillion recorded in June 2026.  

According to the CBN’s financial data, the N83.96 trillion is the third lowest deposited with the apex banking regulating body. 

Experts attributed the decline to OMO sales by CBN, government cash flow, banks increasing lending to the real sector and changes in interbank liquidity conditions. 

“A drop in CBN deposits by banks and merchant banks does not  necessarily mean banks and merchant banks  become less liquid. It can mean that excess liquidity was being converted into loans or securities or was absorbed by the CBN,” said Vice President,  Highcap Securities, Mr. David Adnori

The July 2026 when compared to N10.91 trillion deposit in  July 2025 is about 669.6 per cent increase.

Canks and merchant banks constantly seek attractive interest overnight, making deposit with the CBN the preferred option for them.  

Banks and merchants deposit excess cash with CBN using the Standing Deposit Facility (SDF) window.  

CBN, showed that banks’ and merchant banks’ deposits in March 2026 was the highest with about N128.92 trillion.  In February 2026, it  stood at  N61.11  trillion,16.18  per cent increase when compared to N52.6 trillion deposited in January 2026. 

Between April and May 2026, the banks’ and merchant banks’ deposits with CBN was at N92.32 trillion and N87.13 trillion, respectively.  

The CBN data revealed that in seven months of 2026, banks and merchant banks have deposited an estimated N595.4 trillion , about645.6per cent Year-on- Year (YoY) , an increase of over N79.85 trillion in the seven months of 2025. 

THISDAY had reported that an estimated N336.2 trillion was  deposited with the CBN in 2025 ,about 777.2 per cent YoY increase over N38.33trillion deposited in 2024.

The decision by banks to reduce deposits with the CBN can be attributed to the recent cut in the Monetary Policy Rate (MPR) to 26.50 per cent in February 2026 from 27 per cent 2025. 

Also, the decision was driven by the lower opportunity cost of holding cash with the CBN compared to lending it out in the market. 

The Monetary Policy Committee (MPC) of the CBN in February 2026 had retained the Standing Facilities Corridor around the MPR at +50/-450 basis points.

Analysts at Cordros Research in a report after the November 24-25 MPC meeting stated that  by adjusting the asymmetric corridor to +50/-450basis points (Previous: +250basis points/-250basis points) around the MPR 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,” they explained.  

On the other hand,  banks and merchant banks borrowed an estimated N1.19 trillion from CBN in July 2026, about a 1,386 per cent increase  when compared to N80.11billion  in Jun 2026. 

The reported N1.19 trillion borrowed by banks and merchant banks in July 2026 is the highest amount, followed by  N1.09 trillion in January 2026.

Banks and merchant banks borrowed from the CBN through its Standing Lending Facility (SLF) window in a move to meet critical overnight obligations. 

So far in seven months of  2026, banks and merchant banks have borrowed an estimated N3.52 trillion, representing a decline of 94.5per cent from N65.53  trillion in seven months of 2025.