Excess liquidity tops N6trn as CBN keeps interest rate high

The banking system’s excess liquidity surged as the monetary authority maintained its stance of economic tightening while seeking to tame Nigeria’s double-digit headline inflation.

While there are surplus funds, banks’ lending appetite remains low due to the rising default rate; instead, funds continue to be channelled into special facilities to earn a risk-free rate.

Banks’ lodgments at the Central Bank of Nigeria (CBN) Standing Deposit Facility (SDF) increased to N6.10 trillion, investment banking firms confirmed in separate reports on Wednesday.

Weak lending appetite is expected to persist as the monetary authority maintains contractionary economic policy, which has raised borrowing costs for private sector operators.

The financial system liquidity surplus settled at ₦6.21 trillion, up from the previous open of ₦5.97 trillion by ₦ 241.25 billion. A significant amount of this was due to banks scrambling for alternative avenues to boost earnings.

The breakdown of excess liquidity position in the money market showed that ₦6.10 trillion was placed at the SDF window by commercial banks in addition to ₦8.43 billion in primary market repayments, AIICO Capital said in its report.
Maintaining its policy-tightening stance, the monetary policy committee of the Central Bank left the benchmark rate unchanged at 26.5% and kept all other policy variables unchanged.

The Central Bank of Nigeria (CBN) has retained the Monetary Policy Rate (MPR) at 26.5 per cent, along with other monetary rate parameters.

The Governor of the CBN, Mr. Olayemi Cardoso, said the Standing Facility Corridor around the monetary policy rate was subsequently left at +50/-450 basis points.

The Cash Reserve Requirement (CRR) was also retained at 45% for deposit money banks, 16% for merchant banks, and 75% for non-TSA public sector deposits.

However, the Nigerian Overnight Financing Rate (NOFR) remained steady at 22.00%, with a daily variation of 1.5% as of 19-May-2026. “Barring any significant shocks, we expect the NOFR to remain stable despite the ₦334bn bond auction settlement”, AIICO Capital said.