Banks’ reliance on the Central Bank of Nigeria’s short-term funding window dropped sharply in August, while deposits with the apex bank also declined marginally…..
Commercial banks’ borrowing from the Central Bank of Nigeria’s (CBN) Standing Lending Facility (SLF) fell by 89 per cent in August 2026, pointing to a significant improvement in liquidity conditions within the banking system.
Latest financial data released by the apex bank showed that banks accessed N126 billion through the SLF during the month, compared with N1.19 trillion borrowed in July.
The sharp decline represents a reduction of more than N1 trillion in banks’ reliance on the CBN’s short-term liquidity support within a single month.
The Standing Lending Facility is one of the mechanisms through which the CBN provides short-term funds to banks that require additional liquidity to meet their immediate obligations.
The apex bank also provides liquidity through repurchase, or Repo, transactions. Under a Repo arrangement, the CBN provides funds to banks in exchange for eligible securities, with an agreement that the banks will repurchase the securities at an agreed date and price.
For banks accessing the SLF, the CBN charges an interest rate set at 500 basis points above the Monetary Policy Rate (MPR).
The sharp drop in SLF borrowing in August therefore suggests that banks had less need to rely on the apex bank for short-term funding, amid relatively stronger liquidity conditions in the financial system.
Meanwhile, banks’ deposits with the CBN under the Standing Deposit Facility (SDF) also recorded a marginal decline during the period.
According to the CBN data, deposits under the SDF fell by 1.14 per cent, from N83.95 trillion in July to N82.99 trillion in August.
The Standing Deposit Facility provides banks with an avenue to place excess funds with the CBN and earn interest, making it an important tool for managing liquidity within the financial system.
The movement in both the SLF and SDF figures comes against the backdrop of the CBN’s decision to retain the Monetary Policy Rate at 26.5 per cent.
The apex bank also maintained its other major monetary policy parameters at its most recent meeting.
While the lower demand for SLF funding indicates improved short-term liquidity among banks, it does not by itself mean that lending rates to businesses and individuals have fallen.
The cost of bank credit remains influenced by the prevailing monetary policy rate, banks’ funding costs, risk considerations and other market conditions.
However, sustained improvement in banking-system liquidity could give financial institutions greater room to meet their funding requirements and support credit activities in the economy.
