Banks and merchant banks reduced their deposits with the Central Bank of Nigeria (CBN) by 28.4 per cent to N92.32 trillion in April 2026, down from N128.9 trillion in March 2026. This follows the Monetary Policy Committee's (MPC) decision to cut the Monetary Policy Rate (MPR) to 26.50 per cent from 27 per cent in February 2026. Deposits had risen to N61.11 trillion in February 2026 from N52.6 trillion in January 2026, a 16.18 per cent increase. Banks use the CBN's Standing Deposit Facility (SDF) to earn risk-free overnight returns on excess liquidity. Analysts attribute the April decline to the lower interest rate environment and reduced opportunity cost of holding funds with the CBN. The MPC had set the Standing Facilities Corridor at +50/-450 basis points around the MPR, adjusting SDF and SLF rates to 22.5 per cent and 27.5 per cent respectively. Cordros Research noted the move was expected to ease monetary conditions and boost private sector credit expansion. Total bank deposits with the CBN reached N334.95 trillion in the first four months of 2026, a N2.25 trillion year-on-year increase. Over the same period, banks borrowed N2.2 trillion via the Standing Lending Facility (SLF), down 94.9 per cent from N43.42 trillion in the same period of 2025. Investment banker Tajudeen Olayinka said banks prefer CBN deposits due to uncertainty and lack of prime borrowers. He noted that in the absence of strong lending opportunities, banks opt for the safety of the CBN window.
The sharp drop in bank deposits with the CBN right after the MPR cut exposes a contradiction: while the rate adjustment was meant to push banks toward lending, they had just been piling funds into the CBN for safety. This suggests banks still see the real sector as too risky despite lower rates. The N2.2 trillion borrowed via SLF in 2026—down from N43.42 trillion in 2025—shows reduced liquidity pressure but not increased private credit growth. Nigerian businesses are not seeing the lending surge the policy intended.
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