Nigerian banks’ reliance on the Central Bank of Nigeria’s (CBN) short-term funding facility fell sharply in August, with borrowing through the Standing Lending Facility (SLF) declining by 89 per cent to N126 billion from N1.19 trillion recorded in July 2026.
The significant drop in borrowing suggests an improvement in liquidity conditions within the banking system, reducing the immediate need for commercial banks to seek short-term funding from the apex bank.
The CBN operates key liquidity management facilities through which it provides funds to banks facing short-term funding pressures while also absorbing excess liquidity from the financial system.
The two principal short-term funding windows available to banks are the Standing Lending Facility and repurchase, or Repo, operations.
Through the SLF, the CBN provides overnight funds to banks at an interest rate of 500 basis points above the Monetary Policy Rate (MPR). Repo operations, meanwhile, involve the apex bank providing funds against eligible securities, with banks agreeing to repurchase the securities at an agreed date and price.
The CBN also operates the Standing Deposit Facility (SDF), through which banks can place excess funds with the apex bank.
Data contained in the CBN’s latest Financial Data for August 2026 showed that banks’ deposits under the SDF also declined during the month.
SDF placements fell by 1.14 per cent to N82.99 trillion in August from N83.95 trillion in July, representing a decline of about N960 billion.
The reduction in both SLF borrowing and SDF placements points to a shift in liquidity conditions and the way banks managed their cash positions during the period.
CBN keeps MPR at 26.5%
The development came after the CBN retained its Monetary Policy Rate at 26.5 per cent, alongside other key monetary policy parameters.
With the SLF priced at 500 basis points above the MPR, the applicable SLF rate remains 31.5 per cent under the current policy framework.
The sharp decline in SLF borrowing means banks required significantly less short-term funding from the CBN in August than they did in the preceding month.
However, the reduction in banks’ borrowing from the apex bank does not, by itself, mean that commercial lending rates have fallen. Lending rates are influenced by several factors, including banks’ cost of funds, credit risk, operating expenses and prevailing market conditions.
Nevertheless, sustained improvement in banking-system liquidity could provide banks with greater flexibility in managing their funding needs and, over time, create room for improved credit conditions for businesses and individuals.
The latest figures also underscore the CBN’s continuing role in regulating liquidity through a combination of lending and deposit facilities, while using the MPR and other policy tools to influence monetary and financial conditions.
As banks’ dependence on the SLF eased considerably in August, the data suggest that liquidity pressures that drove the sharp increase in borrowing in July moderated during the month.