Banks borrowing from the Central Bank of Nigeria dropped by 96.04 per cent Year-on-Year to N2.33 trillion in the half year of 2026 from N58.91 trillion in the corresponding period of 2025.
Nigerian banks borrow from the CBN through the Standing Lending Facility window to meet critical overnight obligations, and the sharp decline reflects stronger liquidity and reduced reliance on the apex bank.
The data also showed that banks took caution after the CBN withdrew regulatory forbearance, making them more selective about extending credit to critical sectors.
The Monetary Policy Committee of the central bank in its May 2026 meeting retained the Monetary Policy Rate at 26.50 per cent and the Standing Facilities corridor around the MPR at +50/-450 basis points, meaning that when Nigerian banks need overnight liquidity from the CBN, they typically borrow at 22.5 per cent per annum through the SLF. CBN data revealed that N1.09 trillion in January 2026 and N1.66 billion in March 2026 emerged as the highest and lowest amounts banks borrowed from the apex bank this year.
On the contrary, the CBN data revealed that banks deposited an estimated N511 trillion in H1 2026 as against N68.94 trillion in H1 2025, as banks deposit excess cash with the CBN using the Standing Deposit Facility window which comes with attractive interest overnight, making it a preferred option for banks to earn risk-free returns. Analysis of CBN data showed that banks’ deposits in March 2026 were the highest at about N128.92 trillion, while in February 2026 it stood at N61.11 trillion, a 16.18 per cent increase when compared to N52.6 trillion deposited in January 2026. The total deposit closed June 2026 at N89.33 trillion, about a 479.4 per cent YoY increase over N15.4 trillion in June 2025.
With the SDF remuneration rate at -50 basis points, the eligible overnight excess liquidity deposit with the CBN through the SDF earns 27.50 per cent per annum on those deposits, and the decision by banks to reduce deposits with the CBN can be attributed to the recent cut in the MPR to 26.50 per cent in February 2026 from 27 per cent in 2025, as well as the lower opportunity cost of holding cash with the CBN compared to lending it out in the market.
Analysts at Cordros Research stated that adjusting the asymmetric corridor to +50/-450 basis points around the MPR indicates a reduction in interest rates for the SLF and the SDF to 27.5 per cent and 22.5 per cent respectively, adding that the adjustment is expected to ease monetary conditions and strengthen banks’ private sector credit expansion.
Analysts have expressed that an attractive 27.5 per cent return is one major reason Nigerian banks deposited very large sums with the CBN this year instead of extending more loans to the private sector.
The Vice President of Highcap Securities, Mr. David Adnori, said when there is so much uncertainty in the business environment, banks look for viable opportunities in prime borrowers and therefore would prefer lending to the CBN which is less likely to default in their obligations to lenders.
He explained that where prime borrowers are not largely available in good numbers, banks reprice risks to accommodate non-prime borrowers that are still in good shape to accommodate shocks and high lending rates.
Adnori noted that in the absence of these viable opportunities, banks resort to short-term interbank placements and CBN’s standing deposit window to temporarily hold their cash, adding that what happened in March 2026 was a case of banks taking advantage of a better interest rate available in CBN’s standing deposit window to preserve their excess liquidity.
He said the February 2026 decision of MPC set MPR at 26.5 per cent with the retention of its corridor at +50 basis points and -450 basis points around MPR, noting that the major factor is the uncertainty in the business environment arising from the global energy crisis as a result of the US and Israel war on Iran.
He stated that the implications are very clear as banks will be better accommodated in CBN’s standing deposit window to remove an obvious threat to the current high-yield environment that remains the reason for high inflow from foreign portfolio investors, ensuring better exchange rate management, while non-performing loans in banks are better managed and only viable and bankable opportunities are better pursued by banks.
He further noted that businesses in dire need of long-term capital will prepare themselves to access more stable funding opportunities in the capital market, while high interest rate will persist in the economy.
The desire to see inflation at single digit by all economic agents and government in Nigeria could be further delayed, while economic growth could be challenged as households and firms struggle to manage the likely resurgence in higher cost of living.
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