By Aminu Umar Turaki
Nigerian commercial banks deposited an estimated ₦3.7 trillion into the Central Bank of Nigeria’s (CBN) Standing Deposit Facility (SDF) on December 24, highlighting one of the strongest liquidity buildups in recent months.
CBN financial data covering December 22 to 24, 2025 shows a sharp rise in idle funds placed with the apex bank just ahead of the Christmas holiday, despite earlier efforts by the CBN to withdraw excess cash from the system.
On December 22, the CBN had conducted an ₦1.7 trillion Open Market Operation (OMO) auction to mop up liquidity. However, the latest figures suggest that banks remained heavily cash-laden.
What the data shows
CBN records indicate that deposits placed in the SDF rose from ₦2.47 trillion on December 23 to ₦3.67 trillion on December 24, representing an increase of about ₦1.2 trillion in just 24 hours.
Banks’ opening balances at the CBN also climbed from ₦163 billion to ₦223 billion, further confirming that the banking system entered the festive period with excess cash.
This comes despite the CBN having raised more than ₦11.2 trillion through OMO bills since November, while repaying approximately ₦11.1 trillion, suggesting that liquidity pressures remain elevated.
Analysts say the trend reflects a risk-averse lending environment, with banks preferring to earn a relatively safe overnight return of about 22.5% via the SDF rather than expand credit under tight monetary conditions.
Inside the liquidity surge
The data also points to a possible shift in the CBN’s liquidity management strategy. Rather than issuing new short-term debt aggressively, the apex bank appears to be allowing market forces to rebalance after weeks of intense OMO activity.
On December 23, the CBN processed an OMO repayment of ₦1.14 trillion, part of a broader issuance-repayment cycle that saw roughly ₦22.3 trillion move through the system within eight weeks.
OMO stop rates during the period ranged between 19% and 22%, but the CBN has increasingly relied on the SDF to absorb excess funds—an approach that tightens liquidity without adding to interest costs.
Interest payments on OMO auctions for November and December alone reportedly approached ₦2 trillion, making passive liquidity control a more cost-efficient option.
Market watchers believe the CBN may return to more aggressive OMO interventions in early 2026, particularly to rein in inflation, support foreign exchange stability, and manage government funding needs.
The surge in SDF deposits highlights weak credit expansion, rising caution among banks, and limited investment opportunities in the real economy.
For policymakers, it signals the need to balance liquidity control with economic growth. For investors, it suggests a banking sector adopting a wait-and-see stance as macroeconomic uncertainties persist heading into 2026.
The Standing Deposit Facility (SDF) allows banks to earn interest on excess overnight funds, currently around 22.5%.
The Standing Lending Facility (SLF) serves as the opposite window, offering short-term loans to banks at higher rates.
Rising SDF usage indicates high liquidity but weak lending appetite.
The CBN raised over ₦11.2 trillion in OMO bills between November and December 2025 and repaid nearly the same amount.
Recent trends show a shift toward passive liquidity management by the apex bank.
