Amidst uncertainty in the business environment, banks borrowing from Central
Bank of Nigeria (CBN) dropped by 96.04 per cent Year-on-Year (YoY) to
N2.33trillion in half year (H1) of 2026 from N58.91 trillion in the
corresponding period of 2025.
Nigerian banks borrow from the CBN through Standing Lending Facility (SLF)
window in a move to meet critical overnight obligations.
CBN data showed that banks use of SLF declined in 2026 half year compared to
2025, reflecting stronger liquidity and reduced reliance on the apex bank.
Also, the data showed that banks took caution after the CBN withdrew
regulatory forbearance letting them be more selective about extending credit to
critical sectors.
The Monetary Policy Committee (MPC) of the central bank in its May 2026
meeting retained the Monetary Policy Rate (MPR) at 26.50 per cent and the
Standing Facilities corridor around the MPR at +50/-450 basis points.
This means that when Nigerian banks need overnight liquidity from the CBN,
they typically borrow at 22.5 per cent per annum through the SLF.
CBN data revealed that N1.09 trillion in January 2026 and N1.66 billion in
March 2026 emerged as the highest and lowest amount banks borrowed from
the apex bank this year.
On the contrary, the CBN data, revealed that banks deposited an estimated
N511 trillion in H1, as against N68.94 trillion in H1 2025.
Banks deposit excess cash with CBN using the Standing Deposit Facility (SDF)
window and it comes with attractive interest overnight, making it a preferred
option for banks to earn risk-free returns.
Analysis of CBN’s data showed thaat banks’ deposit in March 2026 was the
highest with about N128.92 trillion. In February 2026, it stood at N61.11
trillion,16.18 per cent increase when compared to N52.6 trillion deposited in
January 2026. The total deposit, however, closed June 2026 at N89.33 trillion,
about 479.4 per cent YoY increase over N15.4 trillion in June 2025. Banking
With SDF remuneration rate at -50 basis points, the eligible overnight excess
liquidity deposit with the CBN through the SDF earns 27.50 per cent per annum
on those deposits.
The decision by banks to reduce deposits with the CBN can be attributed to the
recent cut in the Monetary Policy Rate (MPR) to 26.50 per cent in February
2026 from 27 per cent 2025.
It can also be attributed to lower opportunity cost of holding cash with the CBN
compared to lending it out in the market.
The MPC of the CBN in February 2026 retained the Standing Facilities
Corridor around the MPR at +50/-450 basis points.
Analysts at Cordros Research in a report stated that by adjusting the
asymmetric corridor to +50/-450basis points around the MPR indicates a
reduction in interest rates for the SLF and the SDF to 27.5per cent (Previous:
29.5 per cent) and 22.5per cent (Previous: 24.5per cent), respectively.
“The adjustment is expected to ease monetary conditions and strengthen banks’
private sector credit expansion,” they explained.
Analysts have expressed that attractive 27.5 per cent return is one major reason
Nigerian banks deposited very large sums with the CBN this year instead of
extending more loans to private sector
The Vice President, Highcap Securities, Mr. David Adnori said when there is
so much uncertainty in the business environment, banks look for viable
opportunities in prime borrowers around the country, and therefore, would
prefer lending to CBN who is less likely to default 100 per cent in their
obligations to lenders, including to their suppliers.
He explained further that, “Where the prime borrowers are not largely available
in good numbers, banks reprice risks to accommodate non prime borrowers that
are still in good shape to accommodate shocks and high lending rates.”