Banks in Nigeria have deposited a total of N2.5 trillion with the Central Bank of Nigeria (CBN) through the Standing Deposit Facility (SDF), signaling a major step in liquidity management as institutions sought to maximise returns on excess funds amid a dynamic monetary policy environment.
The significant inflow into the SDF last week reflected heightened caution in the interbank market and a strategic preference by banks to park surplus liquidity with the CBN at relatively attractive interest rates. This move comes at a time when system liquidity closed the week in a deficit of N119.9 billion, representing a 42.0 per cent decline week-on-week, according to market analysts.
The liquidity squeeze was largely attributed to the heavy outflow into the CBN’s deposit window, which far exceeded the N949.2 billion accessed by banks through the Standing Lending Facility (SLF) during the same period.
Despite the liquidity pressures, interbank rates eased slightly, with the Open Buy Back (OBB) and Overnight (OVN) rates closing the week at 26.4 percent and 26.9 percent, respectively, down from 26.5 percent and 27.0 percent the previous week. This suggests some easing in funding costs, even as overall liquidity remained constrained.
Analysts noted that banks’ preference for the deposit window over lending reflects a cautious stance amid ongoing economic adjustments, tightening by the apex bank, and efforts to stabilize inflation and exchange rates.
The CBN’s SDF and SLF tools remained key instruments in its monetary policy framework, allowing it to manage short-term liquidity while guiding interest rates in the financial system.
