Banks’ CBN deposits exceed N6 trillion after OMO refund of N2.4 trillion

Nigerian banks’ net placements at the Central Bank of Nigeria’s (CBN) Standing Deposit Facility (SDF) have surged above 6 trillion naira for three consecutive days after the apex bank redeemed 2.41 trillion naira in maturing Open Market Operation (OMO) securities.

The daily banking system liquidity reports, from October 13 to 16, 2026, showed that SDF net assets increased from about N3.86 trillion as of October 13 to N6.08 trillion as of October 16, an increase of N2.22 trillion, or 57.65%.

The increase followed the N2.408 trillion OMO redemption by the CBN on October 13, which released huge funds into the banking system.

SDF net placements rose to N6.065 trillion on October 14, before declining slightly to N6.044 trillion on October 15. They subsequently rose to N6.083 trillion on October 16, the highest level recorded during the period.

The sustained increase suggests that banks have retained significant surplus funds at the apex bank rather than immediately deploying them elsewhere.

Government bond sales absorbed only a fraction of the liquidity released through maturing instruments.

The CBN recorded N269.06 billion in primary market bond sales during the period, equal to the amount allocated at the October 14 Treasury bond auction.

While subscriptions have reached about N1.032 trillion, the Debt Management Office has only allocated N269.06 billion, leaving approximately 74% of bids unassigned.

Primary market redemptions amounted to N109.96 billion, resulting in a net liquidity absorption of N159.10 billion from such transactions.

With OMO redemptions totaling N2.408 trillion and no new OMO sales reported, the combined transactions generated a net release of securities-related liquidity of approximately N2.25 trillion.

The figures suggest that Treasury bond issuance provided only limited compensation to funds released through maturing securities.

The development highlights the relationship between monetary policy, banking system liquidity and credit availability.

When banks place large funds with the CBN, this may indicate that immediately available liquidity exceeds their short-term funding needs or that alternative investment and lending opportunities are less attractive than the returns available at the apex bank.

However, high SDF placements alone do not prove that banks are deliberately limiting lending.

Demand for credit, borrower risk, capital requirements and prevailing interest rates also influence lending decisions.

However, the persistence of deposits exceeding $6 trillion could raise questions about how effectively the banking system’s excess liquidity is channeled into productive economic activity.

Opening balances remain relatively stable

Despite the sharp increase in SDF placements, banks’ opening balances changed only modestly during the four-day period.

Opening balances increased from N195.08 billion on October 13 to N234.89 billion on October 14, before declining to N199.41 billion on October 15 and N198.32 billion on October 16.

The relatively stable balances contrast with the substantial increase in SDF activity.

The SDF allows banks to deposit surplus funds with the CBN and earn interest, while the Standing Lending Facility provides short-term financing to eligible institutions facing liquidity shortages.

The absence of loans reported through the lending facility, coupled with the high SDF placements, indicates that banks were depositing surplus funds rather than seeking short-term funding from the apex bank during the period.

For monetary policymakers, the trend highlights the importance of monitoring liquidity conditions and transmitting policy decisions to credit markets, investments and broader economic activity.