Deposits held by banks with the Central Bank of Nigeria surged to a weekly record of N3.42 trillion at the end of the last week.
This spike follows the CBN’s recent adjustment of the Standing Deposit Facility (SDF) asymmetric corridor, raising it to +500/-100 basis points from +100/-300 basis points around the monetary policy rate, according to The Punch.
In a recent policy shift, the CBN increased the SDF rate to 25.75%, while the Standing Lending Facility rate was adjusted to 31.75%.
This move came after the Monetary Policy Committee (MPC) voted to raise the MPR by 50 basis points to 26.75%, up from 26.25%.
Experts said the shift was aimed at discouraging banks from holding excess liquidity at the central bank and promoting increased lending activities.
Additionally, these changes are expected to affect the banks’ cost of funds, which will impact the interest rates they offer on loans and deposits.
At the close of the past week, the deposits of banks at the CBN stood at NN3.42tn, the highest in August. The deposits for the previous three weeks combined were N3.57tn.
The committee also maintained the cash reserve ratio at 45% for deposit money banks and 14% for merchant banks, and kept the liquidity ratio steady at 30%.
Experts suggest that these adjustments are designed to curb excess liquidity held by banks at the central bank and to encourage more lending activity.
The new rates are anticipated to impact the banks’ cost of funds, subsequently affecting the interest rates on loans and deposits.
As of the end of last week, bank deposits with the CBN were the highest recorded in August.
For comparison, total deposits for the preceding three weeks were N3.57 trillion.
This follows concerns from February’s MPC meetings, where excess cash was linked to rising inflation.
Recent data also revealed that currency in circulation reached a historic high of N4.05 trillion in July 2024.
The CBN’s Standing Lending Facility continues to offer short-term liquidity support to banks and merchant banks to manage their daily operations.
At the end of August, banks had borrowed over N3.02tn.
Meanwhile, Afrinvest in in its monthly market report projected that the operationalisation of the SDF asymmetric corridor reinforces rally expectations.
“Notably, the CBN has cut the interest rate on excess deposits by commercial and merchant banks above an initial N3.0bn limit to 19.0 per cent, down from 25.75 per cent. This effectively lowers the theoretical floor for T-bills, assuming other factors remain constant.
