Deposit cash banks (DMBs) are more and more avoiding the Central Bank of Nigeria’s (CBN’s) Standing Lending Facility window, at the same time as their opening balances shrink to multi-month lows, the apex bank’s newest liquidity knowledge have revealed.
Between September 18 and 22, 2025, system liquidity swung violently. On Thursday, September 18, the opening balances of banks and low cost homes stood at N582.80 billion, solely to tumble to N215.01 billion the following day and crash additional to N163.80 billion by Monday, September 22.
The drop was dramatic, suggesting tightening liquidity pressures throughout the sector. For banks that depend on giant cushions to fund their day by day operations, such a steep contraction isn’t trivial; it may translate into rising interbank borrowing prices and ripple results throughout credit score markets.
Banks keep away from the CBN lending window
But, as an alternative of turning to the CBN’s Standing Lending Facility (SLF) for short-term funding, banks sat on the sidelines.
Not a single uptake was recorded within the SLF, repo operations, or reverse repos through the three-day stretch, a improvement analysts say, which displays each warning and price sensitivity.
Borrowing in a single day from the CBN stays costly, and banks seem unwilling to incur these prices until completely obligatory.
Deposit window dominates exercise
The Standing Deposit Facility (SDF) — the apex bank’s car parking zone for extra liquidity — was buzzing. Banks positioned N2.36 trillion with the CBN on September 18, N1.45 trillion on September 19, and N1.69 trillion by September 22, CBN’s knowledge present.
The sample reveals a telling paradox: at the same time as opening balances declined, lenders nonetheless most popular to lodge extra money with the regulator moderately than recycle it via interbank loans or credit score creation.
“The desire for the SDF underscores the chance aversion at play,” mentioned Mr. Blakey Ijezie, a chartered accountant and monetary strategist.
“Banks are prioritising security and liquidity preservation over lending, a posture that would choke personal sector credit score additional,” the founding father of Okwudili Ijezie & Co added.
The federal government’s debt operations added one other layer of complexity. On September 18, the Debt Administration Workplace efficiently raised N345.09 billion by way of Treasury Payments and Federal Authorities Bonds, successfully siphoning liquidity from the system.
However by September 22, maturities value N259.04 billion had been repaid to traders, alongside a smaller N78 billion reimbursement earlier within the week, partially replenishing market balances.
This ebb and move of borrowings and repayments created momentary liquidity injections, although not sufficient to offset the steep decline in banks’ opening positions.
Implications for interbank and FX markets
For market watchers, the developments elevate a crimson flag: if opening balances proceed to shrink with out commensurate injections, interbank charges may spike within the coming weeks.
Already, with the naira underneath strain in each the official and parallel markets, the price of liquidity is underneath scrutiny. Any tightening in short-term funding may amplify change price volatility and dent investor confidence.
The CBN is strolling a fragile tightrope. On one hand, it should take up extra liquidity to rein in inflation and shield the naira.
Alternatively, it should keep away from over-tightening that dangers choking the credit score channel and destabilising banks’ day by day operations.
The absence of demand for the lending window suggests banks are both discovering various sources of funding or are intentionally shrinking their stability sheets to climate volatility.
Borrowing prices stay punitive
The broader credit score surroundings makes the image even starker. Recent CBN disclosures present prime lending charges averaging 25.5%–31%, with most charges in some circumstances hitting 46%. Financial savings deposits, in the meantime, yield simply 8.25% on common, with demand deposits fetching lower than 1%.
For corporates in oil and fuel, development, or common commerce, borrowing at charges north of 30% is just prohibitive. For households, saving at single-digit returns in an financial system with inflation above 20% erodes wealth in actual time.
This yawning unfold between what banks pay and what they cost displays structural inefficiencies — from elevated money reserve necessities to Nigeria’s excessive sovereign threat premium. The result’s a paradoxical monetary system: flush with liquidity when parked on the CBN, however starved of inexpensive funding for productive sectors.
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