Nigeria’s commercial lenders parked a record N128.9 trillion with the Central Bank of Nigeria (CBN) in March 2026 through its Standing Deposit Facility (SDF).
This doubles the N61.11 trillion deposited in February and highlights a persistent liquidity pressures amid cautious lending practices.
The dramatic 110.96% month-on-month surge underscores how banks continue to favour the safety of the apex bank’s overnight deposit window — which offers attractive, risk-free returns on idle funds — over extending credit to the real sector of the economy.
According to data released by the CBN and reported across major outlets, this marks the highest single-month placement on record, reflecting a broader trend of abundant system liquidity that has prompted lenders to sterilise huge sums rather than deploy them into loans or investments.
For context, banks had already placed **N52.6 trillion** in January, pushing the cumulative deposits for the first quarter of 2026 to an eye-watering N242.63 trillion a figure that represents a staggering 1,162.2% increase compared to the corresponding period in prior years, according to industry analysis.
Analysts point to several converging factors. The banking sector has seen improved liquidity in recent months, partly buoyed by the recent conclusion of the CBN’s ambitious recapitalisation exercise, which ended on March 31, 2026.
Under that programme, 33 banks successfully raised approximately N4.65 trillion in fresh capital from both domestic and international investors, significantly strengthening balance sheets and injecting additional funds into the system.
Yet, rather than fuelling aggressive lending, this capital — combined with other inflows such as government securities maturities and operational cash flows — has largely remained parked at the CBN.
The SDF allows banks to earn overnight interest (typically set at the Monetary Policy Rate minus a spread, recently around 26.50% when the MPR stood at 27.50%) without collateral, making it a low-risk haven in an environment still marked by economic uncertainty, high inflation, naira volatility, and perceived credit risks in key sectors like manufacturing, agriculture, and small businesses.
Industry observers describe this behaviour as a form of risk aversion. With the SDF offering reliable yields, many lenders appear reluctant to take on the higher risks associated with private sector lending, where non-performing loans have historically posed challenges.
This pattern has repeated throughout 2026, with weekly SDF placements often running into several trillions of naira as banks manage surplus cash.
The implications are twofold and concerning for policymakers. On one hand, the heavy use of the SDF helps the CBN in its liquidity management efforts, preventing excessive money supply from stoking further inflation.
On the other, it signals weak transmission of monetary policy to the real economy: despite stronger capital buffers post-recapitalisation, credit growth to productive sectors remains subdued.
Economists and banking experts have long warned that such trends could constrain economic expansion at a time when Nigeria is seeking to drive growth, create jobs, and diversify beyond oil. “Banks are essentially earning easy returns from the CBN while the real sector continues to struggle for affordable financing,” one analyst noted in recent commentary.
The CBN, under Governor Olayemi Cardoso, has employed aggressive tools — including Open Market Operations (OMO) and Treasury bill auctions — to mop up excess liquidity.
However, the sheer scale of deposits in March suggests that systemic cash surpluses persist, even as the monetary authority has occasionally adjusted the SDF corridor and signalled shifts toward risk-based supervision in the post-recapitalisation era.
As the banking industry enters a new phase with larger, more resilient institutions, questions remain about how quickly these stronger balance sheets will translate into increased lending.
The CBN is expected to continue monitoring liquidity conditions closely, with potential further tweaks to policy rates or standing facilities in upcoming Monetary Policy Committee meetings.
For now, the record N128.9 trillion deposit stands as a clear barometer of the current state of play: a banking system awash with cash, prioritising safety and short-term yields over the riskier but growth-oriented business of lending to Nigeria’s economy.
Whether this liquidity will eventually flow productively into businesses and households — or remain comfortably parked at the apex bank — will be one of the defining tests for the sector in the months ahead.
WHAT YOU SHOULD KNOW
Nigerian banks deposited a record N128.9 trillion with the Central Bank of Nigeria in March 2026 — more than double February’s N61.11 trillion — pushing the first-quarter total to N242.63 trillion.
Despite the successful banking recapitalisation that injected fresh capital, lenders are choosing to park massive excess liquidity in the CBN’s risk-free Standing Deposit Facility rather than lending to the real economy.
This trend reveals persistent risk aversion and weak credit transmission, meaning stronger banks are not yet translating into stronger economic growth through increased lending.
