Commercial and merchant banks in Nigeria placed ₦52.6 trillion in deposits with the Central Bank of Nigeria (CBN) in January 2026, marking a 460 per cent year-on-year increase from N9.39 trillion recorded in the same month of 2025.
The surge in deposits highlights a growing preference among banks to park surplus funds with the apex bank rather than expanding credit to the real sector, analysts say.
According to the CBN, the increase of ₦43.21 trillion reflects excess liquidity in the financial system, attractive overnight interest rates, and continued risk-averse lending behavior among commercial and merchant banks.
Banks typically channel excess cash to the CBN through the Standing Deposit Facility (SDF), which offers overnight interest at relatively high rates.
Market operators note that the combination of elevated policy rates and lingering credit risk has made SDF placements a safe and profitable short-term option.
Data shows that total deposits by banks and merchant banks with the CBN reached an estimated ₦336.2 trillion in 2025, representing a 777.2 per cent increase from ₦38.33 trillion in 2024. Analysts describe this as a clear signal of caution within Nigeria’s banking system.
“The surge in SDF placements reflects concerns about credit quality, weak risk appetite, and the relative safety of the CBN window amid macroeconomic uncertainty,” one market analyst told THISDAY.
In 2025, the CBN adjusted the standing facilities corridor around the Monetary Policy Rate (MPR) to +50/-450 basis points from the previous +250/-250 basis points, following a reduction of the MPR to 27 per cent from 27.5 per cent.
A report by Cordros Research noted that the SDF rate was lowered to 22.5 per cent from 24.5 per cent, while the Standing Lending Facility (SLF) rate fell to 27.5 per cent from 29.5 per cent.
“This indicates a reduction in interest rates for the SLF and the SDF, which is expected to ease monetary conditions and support banks’ private sector credit expansion,” the report stated.
The research firm highlighted that, despite easing adjustments, the MPR was retained at 27 per cent, citing elevated inflation levels. “Inflation remained elevated at double-digit levels, necessitating the maintenance of high interest rates to consolidate the disinflation process,” Cordros said.
Outlook for Credit Growth and the Real Sector
Looking ahead, Cordros analysts expect inflationary pressures to continue moderating, supported by sustained naira stability, improved agricultural output, and stable petroleum prices.
However, they caution that with inflation likely to remain in double digits, the pace of interest rate cuts will be gradual.
“The strong growth in banks’ deposits with the CBN highlights the tension between abundant liquidity and subdued risk appetite, raising fresh questions about how quickly monetary easing can translate into stronger credit growth and real sector activity,” the report concluded.
Rate, Like 👍, Comment 💬, Share this article, Follow us on our social media handles, and Submit your own story to get featured and earn rewards!
WhatsApp Channel
Telegram Channel
