Nigeria’s financial system is witnessing a sharp rise in liquidity. Banks have dramatically increased their deposits with the Central Bank of Nigeria (CBN), reflecting cautious lending and growing market confidence.
New data shows deposits through the Standing Deposit Facility (SDF) surged by 395.8 percent in the first ten months of 2025. The figure climbed to ₦198.08 trillion, up from ₦39.95 trillion recorded in the same period of 2024.
This surge reveals how banks are choosing safety amid ongoing economic adjustments. Rather than expanding risky loans, they prefer to place excess funds with the CBN. Through the SDF, banks can earn interest on short-term deposits, allowing the apex bank to manage liquidity and control inflation.
Financial experts link this trend to the CBN’s tight monetary stance. Recent interest rate hikes have made it more rewarding for banks to keep idle funds with the central bank. Consequently, the CBN is successfully mopping up excess liquidity, reducing inflationary pressure, and maintaining stability in the financial system.
However, this growing preference for SDF deposits also raises concerns. As banks park funds with the CBN, credit to businesses and households may shrink. Limited access to loans could slow job creation and weaken private sector expansion, especially among small and medium enterprises that drive growth.
Despite these risks, analysts agree that the CBN’s approach reflects careful economic management. By prioritizing stability, the bank ensures that short-term liquidity does not overheat the economy. Yet, many urge a gradual shift toward productive lending that fuels investment in manufacturing, agriculture, and technology.
Furthermore, the spike in SDF deposits highlights the resilience of Nigeria’s banking sector. Even amid fluctuating exchange rates and global uncertainty, banks continue to operate with strong liquidity buffers. This strength allows the CBN to maintain tighter control over monetary conditions while preparing for broader economic reforms.
In addition, market watchers are observing how this trend influences interbank rates and lending costs. Sustained high deposits at the CBN may keep borrowing costs elevated. As a result, businesses might face tougher conditions in accessing affordable credit.
To sustain growth, experts recommend a balanced strategy. The CBN must keep inflation in check while supporting lending that boosts local production. Redirecting part of this liquidity toward real-sector investments could strengthen value chains and create more jobs across the country.
Ultimately, Nigeria’s rising SDF deposits tell a larger story. They reflect discipline within the banking industry, cautious optimism about policy direction, and a maturing financial system adapting to reform. With continued coordination between fiscal and monetary authorities, Nigeria can transform this liquidity into long-term growth.
