Excess Liquidity Spikes Banks’ Deposits With CBN Up 460% to N52.6tn
Nigerian banks significantly increased their placements with the Central Bank of Nigeria (CBN) in 2026, as excess liquidity, elevated interest rates and heightened credit risk concerns discouraged lending to the private sector.
Data from the apex bank showed that commercial and merchant banks deposited a combined N52.6 trillion with the CBN in January 2026, representing a 460 per cent year-on-year increase from the N9.39 trillion recorded in the corresponding period of 2025.
The sharp rise underscores banks’ growing preference for risk-free investments over credit expansion amid ongoing macroeconomic uncertainty.
The surge in deposits reflects excess liquidity within the financial system, attractive overnight interest rates and a sustained risk-averse posture by lenders. Banks typically place surplus funds with the CBN through the Standing Deposit Facility (SDF), which offers overnight returns at relatively favourable rates.
According to market operators, the combination of high policy rates and lingering concerns over asset quality has made the SDF a safe and profitable short-term option for banks.
Rather than extending credit to the real sector, many lenders are opting to preserve capital while earning risk-free returns from the apex bank.
Further data indicated that total deposits by banks and merchant banks with the CBN rose to an estimated N336.2 trillion in 2025, representing a 777.2 per cent increase compared with N38.33 trillion recorded in 2024. Analysts described the trend as a clear signal of heightened caution across the banking system.
Market analysts noted that the growing volume of SDF placements reflects weak risk appetite, concerns about credit quality and the relative safety of parking funds with the CBN amid economic uncertainties. While the strategy supports banks’ balance sheets, it also highlights the subdued flow of credit to businesses and households.
In 2025, the CBN adjusted the standing facilities corridor around the Monetary Policy Rate (MPR) to +50 basis points and -450 basis points, from the previous +250/-250 basis points, following a reduction in the MPR to 27 per cent from 27.5 per cent.
The adjustment further enhanced the attractiveness of the SDF window.
Analysts warn that although the trend strengthens financial system stability in the short term, sustained reliance on CBN facilities could constrain private-sector growth if banks continue to prioritise risk-free placements over productive lending.
