Banks in Nigeria drastically reduced their borrowings from the Central Bank of Nigeria (CBN) in April 2025, signalling a notable improvement in liquidity across the financial system.
Data from the CBN reveals that banks’ use of the apex bank’s Standing Lending Facility (SLF) plummeted by 97.6% month-on-month, falling sharply to ₦380 billion in April from ₦16.5 trillion in March.
This significant drop suggests that commercial banks had less need to rely on emergency short-term funding, pointing to stronger liquidity conditions in the banking sector.
A broader analysis of the trend shows that despite the April decline, banks borrowed a total of ₦50.46 trillion from the CBN in the first quarter of 2025 (Q1’25), which represents a 161.5% increase compared to ₦31.25 trillion in the same period of 2024 (Q1’24).
CBN’s Lending and Deposit Framework
The CBN operates two short-term lending windows to support banks in managing temporary liquidity shortages:
- Standing Lending Facility (SLF): Banks borrow from the CBN at an interest rate of 500 basis points above the Monetary Policy Rate (MPR).
- Repurchase Agreement (Repo): The CBN buys securities from banks with a commitment to resell them at a future date and higher price.
Conversely, the CBN allows banks to deposit excess liquidity through the Standing Deposit Facility (SDF), which pays an interest rate of MPR minus 100 basis points.
Banks Parking More Cash at CBN
As lending through the SLF fell, deposits via the SDF rose modestly by 3.08% month-on-month, hitting ₦16.7 trillion in April, up from ₦16.2 trillion in March.
This reflects a continuation of the strong growth observed in the first quarter, when SDF deposits skyrocketed 957% year-on-year, reaching ₦19.2 trillion in Q1’25, compared to ₦1.82 trillion in Q1’24.
Analysts say the strong patronage of the SDF underscores improved liquidity in the interbank market, likely driven by slower loan demand, increased system inflows, or more cautious risk management by banks.
The CBN last year introduced a single-tier remuneration structure for the SDF. Under this system, all deposits are remunerated at MPR minus 100 basis points, currently 26.5%, given the prevailing MPR of 27.5%.
