Nigerian commercial banks deposited a staggering N3.7 trillion into the Central Bank of Nigeria’s (CBN) Standing Deposit Facility (SDF) on December 24, signaling one of the highest liquidity surges in months.
This is according to financial data from the CBN covering December 22–24, 2025, which showed a sharp increase in idle fund placements just ahead of Christmas.
The spike came despite the apex bank’s earlier liquidity mop-up through a N1.7 trillion Open Market Operation (OMO) on December 22, revealing persistent excess cash in the financial system.
What the data is saying
According to CBN’s financial records, bank placements in the SDF jumped from N2.47 trillion on December 23 to N3.67 trillion on December 24, a N1.2 trillion increase within 24 hours.
- Additionally, banks’ opening balances at the CBN rose from N163 billion to N223 billion, reinforcing the idea that commercial banks were flushing with cash heading into the festive weekend.
- Despite mopping up over N11.2 trillion in OMO bills since November and repaying N11.1 trillion, banks remain cash heavy.
Analysts say the surge in liquidity is also a sign of a cautious lending environment where banks prefer to lock funds in secure instruments like the SDF, which yields overnight interest of around 22.5%, instead of expanding credit portfolios amid prevailing monetary tightening.
More on the liquidity surge
The data suggest the apex bank may be avoiding fresh short-term debt issuances, to allow the market to recalibrate after intense OMO operations over the past two months.
On December 23 alone, the CBN processed an OMO repayment worth N1.14 trillion, part of its larger issuance-repayment cycle that saw about N22.3 trillion in liquidity activity in just eight weeks.
While stop rates during these OMO auctions ranged between 19% and 22%, the CBN has signaled a shift to passive liquidity management—opting to use the SDF window rather than issue new debt.
This approach indirectly supports monetary tightening while minimizing the cost of further interest payments, which already neared N2 trillion for November–December auctions.
As 2025 winds down, industry observers suggest that the CBN may resume more aggressive OMO operations in early 2026 to stabilize inflation, support FX markets, and possibly manage government financing requirements.
Why this matter
The massive deposit at the SDF reflects growing unease within the banking sector regarding lending, as well as the CBN’s evolving strategy to control liquidity without constantly issuing new debt.
High levels of idle cash may also indicate limited investment opportunities in the real economy or caution amid macroeconomic uncertainties.
For investors, it signals a banking sector in wait-and-see mode and for policymakers, it points to potential shifts in liquidity and inflation control strategies heading into 2026.
What you should know
- The Standing Deposit Facility (SDF) is the CBN’s tool for absorbing excess liquidity by offering banks interest on overnight deposits, currently around 22.5%.
- Its counterpart, the Standing Lending Facility (SLF), is used when banks need to borrow short-term cash, usually at higher rates.
- The use of the SDF has surged in recent months; a clear sign that liquidity is high while lending activity remains weak.
- The CBN raised over N11.2 trillion in OMO bills between November and December 2025 and repaid almost the same amount.
- Previous Nairametrics coverage has tracked the CBN’s aggressive liquidity management stance.
