Banks cut borrowings from CBN’s SLF by 12.4% to N69.37 tn in eight months – Reports

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Commercial banks reduced their reliance on the Central Bank of Nigeria’s (CBN) Standing Lending Facility (SLF) in the first eight months of 2025, with borrowings dropping 12.4 per cent year-on-year to N69.37 trillion from N79.23 trillion in the same period of 2024.

The SLF, alongside the Repo window, is one of the short-term borrowing channels that the CBN provides to banks. Under the SLF, the apex bank lends to banks at a rate of 500 basis points above the Monetary Policy Rate (MPR). The Repo arrangement, on the other hand, allows the CBN to temporarily purchase securities from banks, with an agreement to resell them at a later date, usually at a higher price.

At the same time, the CBN receives deposits from banks through its Standing Deposit Facility (SDF), which pays MPR minus 100 basis points.

Data trends show that borrowings under the SLF rose sharply in the second quarter of 2025. Banks took N50.46 trillion during the quarter, a 61 per cent jump from N9.38 trillion in the first quarter. July alone saw borrowing climb to N6.63 trillion, up by a massive 245.3 per cent from June’s N1.92 trillion. However, in August the momentum slowed as borrowings fell by 39 per cent to N4.04 trillion.

Explaining the decline, a CBN official said, “The drop in August was largely driven by our aggressive liquidity mop-up, particularly through increased sales of Open Market Operations (OMO) Treasury Bills.”

Figures confirm this. The CBN sold N14.55 trillion worth of OMO bills between January and August 2025, nearly double the N7.45 trillion sold in the same period of 2024 — a rise of 95.3 per cent.

The tighter stance pushed up funding costs in the interbank market. Average interest on collateralised lending (Open Buy Back, OBB) jumped to 26.5 per cent by the end of August 2025, compared with 19 per cent in August 2024.

On the deposit side, banks increasingly placed excess liquidity with the CBN. Deposits through the SDF soared by 454.3 per cent year-on-year to N95.4 trillion in the first eight months of 2025, up from N17.21 trillion a year earlier.

Quarterly data shows that SDF placements surged 158.4 per cent from N19.22 trillion in Q1’25 to N49.68 trillion in Q2’25. However, monthly movements fluctuated — deposits fell by 29.2 per cent to N10.9 trillion in July from N15.4 trillion in June, before rebounding 43 per cent to N15.6 trillion in August.

A financial analyst noted, “The strong preference for the SDF reflects the liquidity glut in the system, coupled with the incentive created by the CBN’s single-tier remuneration framework.”

That framework, introduced last year, set a uniform rate for all deposits under the SDF at MPR minus 100 basis points. With the current MPR at 27.5 per cent, banks are earning 26.5 per cent on their placements with the CBN

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