In February 2025, banks’ borrowing from the Central Bank of Nigeria (CBN) skyrocketed by 171% month-on-month (MoM) to N24.81 trillion, up from N9.15 trillion in January 2025. This sharp increase reflects growing liquidity constraints in the interbank money market.
The CBN provides short-term lending to banks through two primary facilities: the Standing Lending Facility (SLF), which charges an interest rate of 500 basis points (bps) above the Monetary Policy Rate (MPR), and Repo lending, where the CBN purchases banks’ securities with an agreement to sell them back at a predetermined date and price.
Conversely, banks’ deposits with the CBN through the **Standing Deposit Facility (SDF)** fell by 50% MoM to N4.65 trillion in February 2025, down from N9.31 trillion in January 2025. The SDF offers an interest rate of MPR minus 100 bps.
The surge in borrowing was driven by the CBN’s tight monetary policy, aimed at curbing rising inflation. Despite maintaining the MPR and other monetary policy parameters during its recent Monetary Policy Committee (MPC) meeting, the CBN continued its liquidity tightening measures. These included increased sales of Open Market Operation (OMO) Treasury Bills (TBs), which rose by 39.5% to N1.39 trillion in February 2025, up from N1 trillion in January 2025.
The liquidity crunch also led to a sharp rise in interbank lending rates. By the end of February 2025, the average interest rate on Collateralized (Open Buy Back, OBB) lending climbed to 32.5%, up from 27.5% at the end of January 2025.