Zenith, Access, UBA, Others Used Customers' Deposits to Generate Money as CBN Announces new policy

• Nigerian banks have deposited N2.5 trillion with the CBN through the Standing Deposit Facility as they seek to manage liquidity amid a tightening monetary policy
• Despite a system liquidity deficit of N119.9 billion and rising outflows into the CBN’s deposit window, interbank rates slightly eased last week
• Analysts see banks’ preference for depositing funds over lending as a cautious response to economic changes and ongoing efforts to stabilise inflation and currency rates

Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.

To maximise returns on excess funds amid a dynamic monetary policy environment, Nigerian banks have deposited a total of N2.5 trillion with the Central Bank of Nigeria (CBN) through the Standing Deposit Facility (SDF).

Tribune reported that the development marks a significant stride in liquidity management.

Increased caution in the interbank market and banks' strategic desire to store excess liquidity with the CBN at comparatively favorable interest rates were behind last week's significant influx into the SDF.

This action occurred at a time when market experts reported that system liquidity ended the week with a deficit of N119.9 billion, representing a 42.0% weekly decrease.

A major factor contributing to the liquidity pressure was the significant outflow into the CBN's deposit window, which greatly outstripped the N949.2 billion that banks were able to access through the Standing Lending Facility (SLF) over the same period.

The Open Buy Back (OBB) and Overnight (OVN) rates ended the week at 26.4 percent and 26.9 percent, respectively, down from 26.5 percent and 27.0 percent the previous week, indicating a slight easing of interbank rates despite liquidity pressures.

This suggests that although overall liquidity remained limited, funding costs may have eased somewhat.

Analysts observed that banks’ preference for the deposit window over lending suggests a cautious approach amid ongoing economic changes, tightening by the apex bank, and measures to stabilise inflation and currency rates.

The CBN's SDF and SLF tools, which enable it to control short-term liquidity and direct interest rates in the financial sector, continue to be essential components of its monetary policy framework.

Naira appreciates as CBN announces new interest rate

Legit.ng reported that As the Central Bank of Nigeria (CBN) decided to keep the Monetary Policy Rate (MPR) at 27.5%, the value of the naira increased by 0.5% against the US dollar.

According to BusinessDay reports, data from the Nigerian Foreign Exchange Market (NFEM) on Tuesday, May 20, 2025, indicated that the local currency closed at N1,590.45 per dollar, representing a gain of N8.23 over the rate of N1,598.68 the previous day.

Street merchants quoted the dollar at N1,620, and the naira traded steadily in the parallel market despite the increase in the official window.

Source: Legit.ng