By Boluwatife Oshadiya March 6, 2026
Key Points
- Banks’ deposits at CBN Standing Deposit Facility approach ₦6 trillion amid excess liquidity
- System liquidity opens at ₦5.84 trillion surplus following Treasury bill maturities
- Funding costs rise slightly as overnight lending rate climbs to 22.28%
Main Story
Deposit Money Banks (DMBs) significantly increased their placements at the Central Bank of Nigeria’s Standing Deposit Facility (SDF) window, pushing total deposits close to ₦6 trillion as excess liquidity continued to build within the financial system.
The sharp increase reflects weak appetite for new lending by banks amid unsettled macroeconomic conditions and rising credit risk concerns across several sectors of the economy.
According to market data compiled by AIICO Capital Limited, system liquidity opened Thursday with a strong surplus of ₦5.84 trillion, representing an increase of ₦622.34 billion compared with the previous trading session.
The increase was driven largely by a ₦596.05 billion rise in banks’ deposits at the CBN’s SDF window, bringing total placements to approximately ₦5.94 trillion.
Additional liquidity was injected into the system through inflows of ₦799.13 billion from matured Treasury bills. However, part of that inflow was offset by a ₦1.01 trillion settlement tied to the March 4, 2026 Treasury bills auction.
Despite the elevated liquidity conditions, short-term funding costs edged higher in the money market. The average funding rate rose by four basis points to 22.14%.
Money market indicators showed mixed movements. The Overnight lending rate increased by seven basis points to 22.28%, while the Open Repo rate remained unchanged at 22.00%.
Analysts note that rising non-performing loans in the banking sector have also contributed to lenders’ cautious stance toward credit expansion. Several industry reports indicated that non-performing loans rose above prudential thresholds during the fourth quarter following the withdrawal of regulatory forbearance by the central bank.
As a result, banks have become more selective in extending credit, with lending focused primarily on sectors considered less risky.
What’s Being Said
“The strong system liquidity suggests banks currently prefer risk-free placements at the CBN rather than expanding credit aggressively,” analysts at AIICO Capital said in a market note.
What’s Next
- Analysts expect funding costs to ease slightly if liquidity levels remain elevated and no major liquidity-draining operations occur.
- Market participants will watch upcoming Treasury bill auctions and central bank liquidity management actions for signals on money market direction.
- Banking sector credit growth trends will also be closely monitored as lenders adjust risk exposure amid macroeconomic uncertainty.
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