Nigerian commercial banks ramped up placements at the Central Bank of Nigeria’s (CBN) Standing Deposit Facility (SDF) on December 24, depositing about N3.7 trillion in what ranks as one of the strongest liquidity surges seen in recent months.
Financial data from the apex bank covering December 22 to 24, 2025 show a sharp build-up of idle funds in the banking system just days before the Christmas break, despite ongoing efforts by the CBN to absorb excess liquidity.
Sharp Jump in SDF Placements
According to CBN records, total deposits at the SDF rose from N2.47 trillion on December 23 to N3.67 trillion on December 24, representing an increase of about N1.2 trillion within 24 hours.
Banks’ opening balances at the CBN also climbed, rising from N163 billion to N223 billion over the same period. The combination of higher balances and heavier SDF usage suggests that commercial banks were entering the festive period with significant excess cash.
Liquidity Remains High Despite OMO Mop-Up
The surge occurred even after the CBN conducted a N1.7 trillion Open Market Operation (OMO) on December 22, underlining the persistence of surplus liquidity in the financial system.
Since November, the apex bank has raised over N11.2 trillion through OMO bills and repaid about N11.1 trillion, yet banks have remained cash-heavy. On December 23 alone, an OMO repayment of N1.14 trillion injected fresh liquidity into the system, contributing to the spike seen the following day.
In total, the CBN’s issuance–repayment cycle has driven about N22.3 trillion in liquidity activity within roughly eight weeks.
Banks Opt for Safety Over Lending
Analysts say the heavy use of the SDF reflects a cautious lending environment. With tight monetary conditions and lingering macroeconomic uncertainties, banks appear more comfortable placing funds in low-risk instruments than expanding credit.
The SDF currently offers overnight returns of around 22.5 per cent, making it an attractive option compared with the risks associated with lending. This preference has become more pronounced as stop rates at recent OMO auctions ranged between 19 and 22 per cent.
Shift Toward Passive Liquidity Management
Market watchers note that the CBN appears to be shifting toward a more passive approach to liquidity control. Rather than issuing fresh short-term debt aggressively, the apex bank has relied more on the SDF window to absorb excess cash.
This strategy supports monetary tightening while helping to limit the cost of interest payments, which reportedly approached N2 trillion during the November–December OMO auctions.
What It Means Going Into 2026
As 2025 draws to a close, analysts expect the CBN to reassess its stance. More aggressive OMO activity could return in early 2026 as policymakers seek to rein in inflation, support foreign exchange stability and manage government financing needs.
For now, the surge in SDF deposits highlights a banking sector in a wait-and-see mode. High idle cash levels point to subdued lending appetite and limited investment opportunities in the real economy, while also signalling the CBN’s evolving toolkit for managing liquidity without excessive debt issuance.
The Standing Deposit Facility remains a key instrument in this strategy, absorbing excess funds at attractive rates, even as its counterpart—the Standing Lending Facility—sees relatively lower usage. Together, the trends underline a financial system flush with liquidity but cautious about deploying it.