Deposits made by Nigerian banks with the Central Bank of Nigeria (CBN) through its Standing Deposit Facility (SDF) declined by 87 per cent month-on-month to N1.22 trillion in October 2026, compared with N9.4 trillion recorded in September.
Data from the apex bank’s financial records for the end of October also showed a significant reduction in banks’ borrowing through the Standing Lending Facility (SLF).
Borrowings under the facility dropped by 98 per cent to N15 billion in October, down from N920 billion recorded in the preceding month.
The CBN operates two major short-term liquidity facilities for financial institutions: the Standing Lending Facility and the Repurchase (Repo) facility.
Through the SLF, the apex bank provides short-term funds to banks at an interest rate higher than the Monetary Policy Rate (MPR). The Repo facility, meanwhile, allows the CBN to provide liquidity by purchasing securities from banks, with an agreement to resell them at a predetermined date and price.
The Standing Deposit Facility serves as an avenue for banks to deposit excess funds with the CBN and earn interest on their surplus liquidity.
The sharp decline in both deposits and borrowings suggests that banks relied considerably less on the apex bank’s liquidity management facilities during the period under review.
The development follows the CBN’s recent decision to reduce the Monetary Policy Rate from 26.5 per cent to 23 per cent.
Following the adjustment, the interest rate on the Standing Lending Facility was reduced from 27 per cent to 23.5 per cent, placing it 50 basis points above the MPR.
Similarly, the Standing Deposit Facility rate was lowered from 22 per cent to 20 per cent, representing 300 basis points below the new benchmark rate.
The changes reduced the cost of obtaining short-term funds from the CBN while also lowering the returns banks earn from depositing excess liquidity with the apex bank.
The revised interest rate structure could influence how banks manage their available funds, potentially encouraging them to channel more resources into lending and other investment opportunities rather than keeping surplus cash with the CBN.
Source: VANGUARD
