By Adefolarin A. Olamilekan | IDNN Business & Finance
Banks and merchant banks deposited a record-breaking ₦17.83 trillion with the Central Bank of Nigeria (CBN) in April 2025 alone — the highest monthly deposit on record. The CBN confirmed the data through its Standing Deposit Facility (SDF) report, signaling growing liquidity preservation among banks.
Between January and April 2025, total deposits via the SDF window hit ₦37.05 trillion — a staggering 1,549% year-on-year increase from ₦2.25 trillion in the same period of 2024.
📊 What’s Driving the Spike?
The Standing Deposit Facility (SDF) is a monetary policy tool that allows banks to deposit excess funds with the CBN overnight in exchange for interest, currently set at MPR minus 100 basis points — which stands at 26.5% with the current Monetary Policy Rate at 27.5%.
This sharp increase follows a series of rate hikes by the CBN’s Monetary Policy Committee (MPC), led by Governor Yemi Cardoso, aimed at curbing inflation and stabilizing the naira.
In 2024, total deposits through SDF reached ₦38.12 trillion — up 210.15% from ₦12.29 trillion in 2023 — with a notable ₦8.12 trillion peak in August 2024.
🏦 Why Are Banks Avoiding Lending?
Financial analysts say the shift to SDF signals banks’ growing reluctance to lend to the real economy. This caution stems from:
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Rising non-performing loan (NPL) risks
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Insecurity and supply chain disruptions
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Persistent inflation and currency instability
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Declining consumer purchasing power
Instead of pushing credit into volatile sectors, banks are opting for safe returns on overnight deposits with the CBN.
“The SDF’s high interest return now outweighs the risk-adjusted returns from the real sector,” one senior analyst noted.
🔁 Policy Shift: CBN Removes SDF Cap
In 2024, the CBN ended the two-tier remuneration structure for SDF, where only deposits up to ₦3 billion earned high interest. Now, all SDF placements receive the same rate — a move intended to boost participation and help mop up excess liquidity.
Governor Cardoso explained the reform as part of a broader strategy to manage liquidity and inflation while strengthening the apex bank’s control over monetary flow.