Surge in bank deposits at CBN facility signals mounting liquidity pressure and complicates monetary control efforts….
Nigeria’s financial system is witnessing a sharp build-up of excess cash, with banking sector liquidity soaring to N8.06 trillion as institutions ramp up deposits with the Central Bank of Nigeria’s Standing Deposit Facility (SDF).
Fresh data released by the apex bank shows that the figure was recorded at the close of trading on Wednesday, March 18, marking a significant spike within a condensed three-day trading window.
The surge comes against the backdrop of a shortened week, following public holidays that paused market activity on Thursday and Friday. Despite the limited trading period, liquidity conditions tightened further, underscoring the scale of surplus funds circulating within the system.
Cash Piles Up Across Banks
Financial institutions significantly increased their SDF placements during the period, reflecting a rapid accumulation of excess reserves.
Within just one day, deposits jumped by N1.39 trillion from N6.67 trillion to N8.06 trillion highlighting how quickly liquidity pressures are intensifying. At the same time, opening balances held by banks and discount houses also climbed, rising from N103.66 billion on March 16 to N120.60 billion by March 18.
A key driver behind this surge was a wave of liquidity injections totaling N926.30 billion. These inflows, stemming from Open Market Operations (OMO) repayments and maturing primary market instruments, returned previously locked funds into the banking system.
Unlike earlier in the month, when a single large maturity dominated inflows the latest injections were more evenly spread across the three days, creating a steady and compounding increase in available cash.
By the end of the period, SDF balances had surged well beyond the N5.20 trillion to N5.65 trillion range recorded the previous week, signaling a sharp shift in liquidity conditions.
What’s Driving the Spike
A closer look at the inflows reveals that maturing financial instruments played a central role in boosting liquidity.
The largest injection occurred on March 17, when N785.75 billion from OMO maturities combined with N83.60 billion in primary market repayments. Additional inflows followed on March 18 and March 16, reinforcing the upward momentum.
As these funds flowed back into banks’ balance sheets, excess cash levels expanded rapidly, pushing institutions to park more money with the central bank.
A Growing Challenge for Monetary Policy
The current liquidity surge represents a significant escalation compared to recent months and highlights the persistence of excess cash despite ongoing regulatory efforts.
In February 2026, SDF deposits peaked at around N4.26 trillion during similar liquidity spikes roughly half of the current level. Even then, aggressive sterilisation measures absorbed trillions within days, yet banks still maintained elevated balances.
Now, with liquidity exceeding N8 trillion, the scale of the surplus has more than doubled, pointing to a deeper and more sustained glut in the system.
For the Central Bank, this trend presents a delicate balancing act. While excess liquidity can support lending and economic activity, it also raises concerns about inflationary pressure and weakens the effectiveness of monetary policy tools.
As cash continues to build within the system, attention will increasingly turn to how regulators respond and whether additional measures will be needed to rein in the growing surplus.
For now, one thing is clear: Nigeria’s banking system is awash with cash, and managing it is becoming more complex by the day.
About the Author
