Banks flood CBN with record N4.8trn as liquidity glut deepens

Nigeria's banking sector is overflowing with cash, as deposit money banks (DMBs) lodged a record N4.816 trillion with the Central Bank of Nigeria (CBN) through its Standing Deposit Facility (SDF) as of Friday, November 7, 2025.

This massive deposit reflects growing risk aversion in the financial system. Banks are increasingly opting to earn a risk-free 24.8 per cent interest from the CBN rather than lend to one another or the private sector.

Fresh data from the CBN showed the banking system remained highly liquid throughout the first week of November. SDF placements surged from N4.424 trillion on November 5 to N4.816 trillion two days later.

Overall system liquidity also grew steadily between October 31 and November 5, with deposits rising from N2.301 trillion to N2.994 trillion.

Despite this overall abundance, market analysts observed that a few large banks held the majority of the surplus, leaving smaller lenders facing selective funding pressures and keeping interbank activity subdued.

Government debt operations provided a modest boost to system liquidity. On Thursday, November 6, the Debt Management Office (DMO) raised N546.24 billion but repaid N662.76 billion in maturing securities. This resulted in a net injection of about N116.52 billion, helping banks' opening balances rise from N141.11 billion on November 5 to N247.17 billion on November 7.

Meanwhile, borrowing from the CBN’s emergency overnight window, the Standing Lending Facility (SLF), remained minimal at just N2.85 billion, further underscoring the widespread liquidity glut.

The high level of deposits at the CBN clearly indicates banks’ preference for safety amidst lingering uncertainties in the foreign exchange market, collateral constraints, and settlement challenges.
“The numbers show that banks are liquid, but they’re not lending,” one money market dealer noted. “They would rather earn risk-free returns from the CBN than take exposure in an unpredictable environment.”

Economists warn that the persistent build-up of excess reserves at the CBN could weaken monetary policy transmission, as abundant liquidity fails to translate into credit growth or stronger interbank trading.

While the current position gives the CBN flexibility to sterilise excess cash, experts believe lasting improvement requires structural reforms to improve risk-sharing and liquidity distribution among banks.

Money-market rates are expected to remain soft in the near term, though uneven liquidity access could still trigger short-term volatility if major fiscal withdrawals or FX interventions occur.