Banks enjoy excess liquidity as constraints decline in interbank money market
By Jeph Ajobaju, Chief Copy Editor
Banks’ Standing Deposit Facility (SDF) with the Central Bank of Nigeria (CBN) jumped 568.7 per cent year-on-year (YoY) to N146.13 trillion in the first nine months of 2025 (9M 2025) from N21.85 trillion in 9M 2024, showing excess liquidity in the banking system.
SDF rose 158.4 per cent quarter-on-quarter (QoQ) from N19.22 trillion in Q1 2025 to N49.68 trillion in Q2 2025 and 55.4 per cent to N77.23 trillion in Q3 1015.
The highest deposit of N50.73 trillion was in September 2025, per latest CBN figures quoted by Vanguard.
The continuous strong patronage of SDF reflects both excess liquidity in the system and the effect of the shift by the CBN to a single-tier remuneration structure for SDF last year.
CBN Monetary Policy Committee (MPC) last week cut monetary policy rate (MPR) by 50 basis points (bps) to 27 per cent.
The CBN has two short term lending windows for banks – Standing Lending Facility (SLF) and Repo lending.
It lends money to banks through SLF at an interest rate of 500 bps above MPR and through Repurchase (Repo) arrangement, which involves the purchase of banks’ securities with agreement to sell back at a specific date and usually for a higher price.
On the other hand, the CBN accepts deposits from banks through SDF and pays an interest rate of MPR minus 100 bps.
But banks’ borrowings through SLF declined 12.4 per cent YoY from N87.09 trillion in 9M 2024 to N69.37 trillion in 9M 2025.
Borrowing through SLF rose 61 per cent QoQ from N9.38 trillion in Q1 2025
to N50.46 trillion in Q2 2025 and to N106.70322 trillion in Q1 2025.
The lowest value banks borrowed was N322 million in September 2025 which reflects a decline in liquidity constraints in interbank money market.
The CBN conducted a liquidity mop up through regular sales of Open Market Operations (OMO) treasury bills (TBs) during the period, selling N15.23 trillion OMO TBs in 9M 2025, up 86.6 per cent from N8.16 trillion in 9M 2024.
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