Deposits by Nigerian banks with the Central Bank of Nigeria (CBN) soared to a historic N128.9 trillion in March 2026, highlighting mounting excess liquidity in the financial system and a growing preference among banks for risk-free returns.
Latest figures obtained from the CBN showed that the March deposit level represents a sharp 110.96 per cent increase from N61.11 trillion recorded in February 2026.
Analysts attributed the surge to an aggressive deployment of surplus funds by deposit money banks into the apex bank’s Standing Deposit Facility (SDF), a mechanism that offers overnight interest on idle liquidity.
A deeper look at the data showed that banks had earlier deposited N52.6 trillion in January 2026, reflecting a staggering 460 per cent jump from N9.39 trillion in January 2025.
Cumulatively, the banking sector placed an estimated N242.63 trillion with the CBN in the first quarter of 2026, representing a dramatic rise of 1,162.2 per cent compared with N19.22 trillion recorded in the corresponding period of 2025.
On a full-year basis, deposits climbed to N336.2 trillion in 2025, marking a 777.2 per cent increase from N38.33 trillion in 2024.
This surge underscores the rapid expansion of liquidity in the Nigerian banking system over the past year.
Market observers said the spike is largely driven by banks’ growing credit risk concerns, as lenders increasingly prefer the safety of the CBN’s SDF window over extending credit to the real sector amid prevailing economic uncertainties.
An investment banker and stockbroker, Mr. Tajudeen Olayinka, explained that limited availability of creditworthy borrowers has prompted banks to adopt a more cautious approach.
“When viable prime borrowers are limited, banks either reprice risk for other borrowers or turn to safer short-term instruments.
”In the absence of sufficient bankable opportunities, they resort to interbank placements and the CBN’s standing deposit window,” Olayinka said.
He noted that the March surge was largely driven by banks taking advantage of attractive returns at the SDF, which is supported by recent monetary policy adjustments.
The CBN retained the Monetary Policy Rate (MPR) at 26.5 per cent while maintaining an asymmetric corridor of +50 and -450 basis points, making the SDF more appealing for banks seeking to park excess funds.
Olayinka added that the CBN is conscious of the trend and has deliberately maintained the lower bound of the interest rate corridor at -450 basis points around the MPR to encourage banks to channel liquidity into the regulator rather than engage in higher-risk lending.
The investment banker linked banks’ cautious stance to both domestic and global uncertainties, including ongoing geopolitical tensions in the Middle East, which continue to disrupt energy markets and exacerbate macroeconomic risks.
“The implication is that banks will continue to find comfort in the CBN window, which helps stabilise the financial system and supports exchange rate management by sustaining foreign portfolio inflows,” he said.
However, Olayinka warned that the preference for risk-free placements could have broader economic consequences, including constrained credit to the real sector, sustained high interest rates, and delayed progress in achieving single-digit inflation.
He noted that while non-performing loans may remain under control due to quality-focused lending, businesses seeking long-term capital may increasingly turn to the debt capital market.
“Economic growth could face headwinds as firms and households grapple with high borrowing costs and rising living expenses,” he added.
