Nigerian banks have placed a record sum of N128.9 trillion with the Central Bank of Nigeria (CBN), marking an all-time high that highlights significant excess liquidity in the financial system and a trend towards risk-free returns.
The March figure represents a dramatic increase of 110.96 percent from the N61.11 trillion recorded in February 2026. This substantial rise is largely attributed to deposit money banks aggressively utilising the CBN's Standing Deposit Facility (SDF), a mechanism that allows them to earn overnight interest on idle funds.
Further examination of the data reveals that banks had previously deposited N52.6 trillion in January 2026. This amount showed a remarkable surge of approximately 460 percent when compared to the N9.39 trillion deposited in January 2025.
Across the first quarter of 2026, cumulative deposits made by banks with the CBN amounted to an estimated N242.63 trillion. This figure signifies a substantial increase of 1,162.2 percent compared to the N19.22 trillion lodged during the same period in 2025.
On an annual basis, bank deposits reached N336.2 trillion in 2025, an impressive 777.2 percent jump from N38.33 trillion in 2024, underscoring the rapid expansion of liquidity within Nigeria's banking sector over the past year.
Financial market observers suggest that this trend is influenced by heightened concerns over credit risk. Consequently, banks are increasingly opting for the security offered by the CBN's deposit window over extending credit to the real economy, especially amidst ongoing economic uncertainties.
Industry professionals have noted that the scarcity of viable and creditworthy borrowers prompts banks to either increase interest rates for other clients or seek safer, short-term investment avenues. When bankable opportunities are limited, banks often turn to interbank lending and the CBN’s standing deposit facility.
The significant increase observed in March, according to these experts, was primarily driven by banks seeking to preserve their liquidity by leveraging the relatively attractive returns offered by the SDF.
It has been noted that the CBN is monitoring this trend and has intentionally set the lower bound of the interest rate corridor at -450 basis points relative to the Monetary Policy Rate (MPR) to encourage banks to channel surplus liquidity towards the regulator instead of engaging in riskier lending activities.
The cautious approach adopted by banks is also linked to broader global and domestic instability, including geopolitical developments in the Middle East that affect energy markets and amplify macroeconomic risks.
This situation suggests that banks will likely continue to favour the CBN window as a secure place to hold funds, which aids in stabilising the financial system and supports exchange rate management through the sustained inflow of foreign portfolio investments.
However, concerns have been raised about the potential wider economic consequences. These include restricted credit availability for the real sector, persistently high interest rates, and delays in achieving the target of single-digit inflation.
While the focus on quality lending may help keep non-performing loans in check, businesses requiring long-term financial backing may increasingly need to explore funding options in the debt capital market.
Furthermore, economic expansion could face challenges as both businesses and households contend with the high cost of borrowing and escalating living expenses.
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