Deposit Money Banks are increasingly shunning the Central Bank of Nigeria’s Standing Lending Facility, even as their opening balances have fallen to multi-month lows, according to the apex bank’s latest liquidity data.

Between September 18 and 22, 2025, system liquidity swung sharply.

Banks and discount houses opened with N582.80 billion on Thursday, September 18, but this dropped to N215.01 billion the next day and slid further to N163.80 billion by Monday, September 22, according to Nairameteics.

The sharp decline points to tightening liquidity across the sector. For banks that depend on strong buffers to manage daily operations, such a contraction could push up interbank borrowing costs and spill over into credit markets.

Despite the liquidity squeeze, banks avoided the CBN’s SLF.

For three consecutive days, there were no transactions in the SLF, repos, or reverse repos—a sign, analysts note, of caution and sensitivity to cost.

Overnight borrowing from the CBN remains pricey, and lenders appear unwilling to shoulder the expense unless it becomes unavoidable.

By contrast, the Standing Deposit Facility was active. Banks parked N2.36 trillion with the CBN on September 18, N1.45 trillion on September 19, and N1.69 trillion on September 22, the data show.

The pattern underscores a paradox: even with shrinking opening balances, lenders still preferred placing idle cash with the apex bank rather than channeling it into interbank lending or credit creation.

“The preference for the SDF underscores the risk aversion at play.

“Banks are prioritising safety and liquidity preservation over lending, a posture that could choke private sector credit further,” the founder of Okwudili Ijezie & Co, Mr. Blakey Ijezie, stated.

Government debt operations added fresh pressure. On September 18, the Debt Management Office raised N345.09 billion through Treasury Bills and Federal Government Bonds, draining liquidity from the system.

By September 22, however, maturities worth N259.04 billion were repaid, alongside an earlier N78 billion, providing only partial relief.

This push-and-pull of borrowings and repayments injected some liquidity but failed to offset the sharp drop in banks’ opening balances. Analysts warn that if the trend persists without stronger inflows, interbank rates could surge in the coming weeks.

With the naira already under strain in official and parallel markets, the cost of liquidity is being closely watched.

Any tightening in short-term funding risks fueling exchange rate volatility and weakening investor confidence.

The CBN faces a delicate balancing act: mopping up liquidity to curb inflation and defend the naira, while avoiding an over-tightening that could stifle credit flows and disrupt banks’ operations.

The muted use of its lending window suggests banks are either sourcing funds elsewhere or deliberately scaling back their balance sheets to navigate volatility.