Banks’ deposits with the Central Bank of Nigeria (CBN) through the Standing Deposit Facility (SDF) rose to an unprecedented N50.73 trillion in September 2025, underlining the surge in excess liquidity across the financial system.
In sharp contrast, banks borrowed just N322 million from the apex bank during the month, representing a dramatic 99.99% decline year-on-year from N7.86 trillion in September 2024.
According to data from the CBN, deposits jumped by 992% from N4.65 trillion in September 2024 to the record high in September 2025. Since the beginning of the year, banks have placed a total of N146.2 trillion with the CBN compared to N23.12 trillion in the same period of 2024, a staggering 532% increase.
May 2025 saw the second-highest deposit at N17.54 trillion, while borrowings dropped to N68.43 trillion in the first nine months of the year, down 21% from N87.08 trillion recorded in the corresponding period of 2024.
The shift in banks’ behavior comes against the backdrop of monetary policy adjustments. The Monetary Policy Committee (MPC) had raised the policy rate steadily from 18.75% in 2023 to 27.50% in 2024 in a bid to curb inflation and stabilize the naira.
However, in September 2025, the CBN reduced the rate by 50 basis points to 27.0%, moving toward an expansionary stance after five consecutive months of disinflation, with inflation easing from 21.88% in July to 20.12% in August 2025. Under the current framework, SDF deposits are remunerated at MPR minus 100 basis points, which translates to an attractive yield of 24.5%.
Analysts attribute the surge in SDF activity to banks’ risk aversion and strong liquidity. Investment banker Tajudeen Olayinka explained that insecurity, inflation, low productivity, weak consumer demand, and limited risk-free investment instruments have discouraged lending to businesses.
He noted that many banks prefer to absorb regulatory penalties for shortfalls in loan-to-deposit ratios rather than extend risky credit. Similarly, Ambrose Omordion, Chief Operating Officer of InvestData Consulting, said banks see the SDF as a safe, high-yield alternative that helps safeguard against non-performing loans.
CBN Governor Olayemi Cardoso had earlier disclosed that the removal of the cap on remunerable SDF deposits was aimed at boosting activity in the window and strengthening liquidity management.
With Treasury bill yields lagging behind inflation, analysts believe banks will continue to favor SDF placements as a secure and profitable option in the near term.
