Nigerian Deposit Money Banks (DMBs) made a record single-day withdrawal of ₦1.2 trillion from the Central Bank of Nigeria’s (CBN) Standing Lending Facility (SLF) to cover a severe liquidity shortfall, according to TrustBanc Financial Group Limited.
The banking system is grappling with a significant liquidity deficit, which stood at ₦266.55 billion on Thursday, compared to a ₦201 billion surplus earlier in the week. The shortfall is attributed to large outflows from CBN auctions and an undisclosed foreign exchange (FX) swap settlement, which have drained liquidity from the financial system.
Market analysts explain that liquidity fluctuations are common, as banks’ investments in government securities and subsequent debits for placements often impact liquidity levels and interest rates. On Thursday, banks faced increased funding obligations, leading to liquidity strain and a surge in interbank funding rates. Overnight Placement Rate (OPR) and Overnight (O/N) rates spiked by over 340 basis points to 31.50per cent and 32.00 per cent, respectively.
To manage the shortfall, banks turned to the CBN’s SLF window, marking the highest single-day borrowing so far this year. Analysts at TrustBanc expect funding rates to remain elevated given current liquidity conditions.
Earlier this year, the CBN disclosed that commercial and merchant banks borrowed a total of ₦8.2 trillion from the SLF within the first 17 business days of January 2025. During the same period, banks’ deposits at the CBN stood at ₦6.69 trillion, reflecting their ongoing efforts to balance lending to the real sector while managing liquidity constraints.
The SLF serves as a short-term funding mechanism that allows banks to access liquidity for daily operations. Conversely, banks can deposit excess liquidity with the CBN through the Standing Deposit Facility (SDF).
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