Nigerian financial institutions deposited a total of N52.6 trillion with the Central Bank of Nigeria (CBN) in January 2026. This remarkable figure is attributed to the reluctance to lend to the private sector, influenced by elevated interest rates and concerns over risks.
The substantial rise in deposits indicates a prevailing excess liquidity situation within the financial sector, as well as a tendency among banks to prefer attractive overnight interest rates while exhibiting caution in lending.
Data from the CBN revealed that this N52.6 trillion represents a staggering increase of N43.21 trillion from the N9.39 trillion recorded in January 2025. Banks commonly utilize the Standing Deposit Facility (SDF) of the CBN for depositing surplus cash, which provides competitive overnight interest rates.
Market analysts have pointed out that the high policy rates and ongoing credit risk apprehensions have cemented the SDF as a secure and profitable option for short-term investments.
It was reported that total bank deposits with the CBN peaked at an estimated N336.2 trillion in 2025, marking an astonishing year-on-year increase of 777.2 percent from N38.33 trillion in 2024.
Experts view this trend as indicative of heightened caution within the banking sector. They suggest that the increase in placements into the SDF reflects ongoing apprehensions about credit quality, reduced risk tolerance, and the relative safety offered by the CBN amid challenging macroeconomic conditions.
Instead of aggressively expanding credit to the private sector, many banks are opting to safeguard their capital while obtaining risk-free returns. In 2025, the CBN revised the parameters around the Monetary Policy Rate (MPR), adjusting the standing facilities corridor to +50 basis points and -450 basis points, stepping down from the previous +250/-250 basis points, following a decline in the MPR from 27.5 percent to 27 percent.
This adjustment hinted at a cautious approach to easing monetary policy while still adhering to a stringent overall strategy. A study from Cordros Research subsequent to the Monetary Policy Committee (MPC) meeting on November 24-25, 2025, noted that the SDF rate was reduced from 24.5 percent to 22.5 percent, while the Standing Lending Facility (SLF) rate fell to 27.5 percent from 29.5 percent, aligning with the modified corridor around the MPR.
Cordros Research indicated that while the MPC decided to maintain the MPR at 27 percent, contrary to predictions of a substantial cut, inflationary pressures remained significant, which warranted the upholding of elevated interest rates to stabilize the disinflation process.
Moreover, the research firm observed that the adjustment of the asymmetric corridor, which suggested an easing inclination, also reflected a careful stance by the Committee. "This implies a reduction in interest rates for both the SLF and the SDF, expected to alleviate monetary conditions and bolster banks' lending to the private sector," they stated. Looking ahead to 2026, analysts at Cordros Research predict that inflationary pressures could continue to ease, aided by stable naira values, improved agricultural yields, and steady oil prices.
However, they warned that even with inflation likely to persist in double- digit territory, the pace of interest rate reductions would remain gradual. Currently, the robust growth of banks' deposits with the CBN underscores the conflict between surplus liquidity and a limited willingness to take risks, thereby raising important questions about how quickly monetary easing might translate into increased lending and economic activity.
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