Nigerian banks trimmed their excess cash holdings with the Central Bank of Nigeria (CBN) in August, but the volume of funds parked with the apex bank remained substantial.
Banks’ deposits through the Standing Deposit Facility (SDF) fell by 1.14 per cent month-on-month to N82.99 trillion in August 2026, down from N83.96 trillion in July, according to the latest CBN financial data.
The August figure was the third-lowest monthly SDF placement recorded by banks so far this year.
Why Banks Park Funds With the CBN
The SDF allows banks to place excess liquidity with the CBN overnight and earn interest on those deposits.
The moderation in August came against a backdrop of changing liquidity conditions and the search for competitive returns, following the CBN’s decision to reduce the Monetary Policy Rate (MPR) to 26.50 per cent in February 2026, from 27 per cent in 2025.
The Monetary Policy Committee has maintained the Standing Facilities Corridor at +50/-450 basis points around the MPR during 2026.
CBN figures show that banks placed:
- N128.92tn in March — the year’s highest monthly level
- N92.32tn in April
- N87.13tn in May
- N89.30tn in June
- N83.96tn in July
- N82.99tn in August
February recorded N61.11 trillion, up from N52.6 trillion in January.
SDF Placements Surge in 2026
Despite the August decline, banks’ cumulative placements with the CBN have risen sharply.
An estimated N678.36 trillion was deposited through the SDF between January and August 2026. That represents an increase of about 610.58 per cent from the N95.47 trillion recorded during the same period in 2025.
The trend follows a much larger increase recorded last year. According to previous reporting, banks placed an estimated N336.2 trillion with the CBN in 2025, up 777.2 per cent from N38.33 trillion in 2024.
Lower Rates Could Encourage Lending
Cordros Research analysts have linked changes in the Standing Facilities Corridor to lower rates on the CBN’s lending and deposit facilities.
They said the adjustment from the previous +250/-250 basis-point corridor to +50/-450 basis points reduced the Standing Lending Facility rate from 29.5 per cent to 27.5 per cent, while the SDF rate fell from 24.5 per cent to 22.5 per cent.
The analysts said the move could loosen monetary conditions and encourage banks to increase lending to the private sector.
Less CBN Deposits Does Not Mean Less Liquidity
For some analysts, the decline in SDF placements should not automatically be interpreted as a deterioration in banks’ liquidity.
David Adnori, Vice-President at Highcap Securities, said banks could simply be redirecting excess funds into loans, securities or other channels.
In other words, less money parked at the CBN does not necessarily mean less money in the banking system.
Credit Risk Keeps Banks Cautious
Investdata Consulting’s Chief Research Officer, Ambrose Omordion, pointed to another factor: banks remain wary of lending because of concerns about non-performing loans.
High interest rates have also made borrowing more expensive for customers, increasing the difficulty of servicing loans.
Omordion argued that banks therefore have an incentive to favour fixed-income investments and CBN placements, where returns are comparatively predictable and perceived risks are lower.
He said further CBN rate cuts could encourage banks to channel more funds toward the real economy.
He also expects the banking sector’s recapitalisation programme to improve financing for businesses and support the government’s long-term ambition of building a $1 trillion economy.
The Bigger Problem: Plenty of Cash, Limited Credit
Investment banker and stockbroker Tajudeen Olayinka described the trend as evidence of a wider imbalance within Nigeria’s financial system.
Banks have liquidity, but lending remains constrained by high interest rates, credit risk, economic uncertainty, inflation, exchange-rate volatility and weak consumer confidence.
That creates a difficult choice for lenders.
Parking excess funds with the CBN provides a relatively predictable return. Lending to businesses, meanwhile, carries greater exposure to borrowers struggling with rising costs and uncertain demand.
The key question, therefore, is not simply why SDF deposits fell in August. It is whether the money leaving the CBN will ultimately find its way into productive lending.
If banks become more willing to extend credit to businesses and consumers, the decline in SDF placements could signal a meaningful shift in the economy. If not, it may simply reflect banks moving excess liquidity between relatively low-risk assets.
