Commercial banks in Nigeria deposited 4.74 trillion naira with the Central Bank of Nigeria (CBN) through the Standing Deposit Facility (SDF) mechanism on Monday, July 20, representing a 14.24% increase from the previous session’s 4.15 trillion naira. This increase occurred in a context of abundant liquidity in the financial system.
The increased use of SDF indicates that banks preferred to place their excess cash with the central bank on a day-to-day basis rather than lending it in the interbank market. This mechanism allows institutions to earn interest on their excess liquidity.
According to the Financial Markets Dealers Association (FMDA), liquidity in the banking system increased by 50.81% in a week to 4.33 trillion naira, compared to the previous 2.87 trillion naira. This rise reflects a level of fund inflows higher than the sterilization operations conducted by the central bank.
The CBN withdrew around 1.06 trillion naira through Treasury bill auctions, while maturing securities repayments amounted to 2.50 trillion naira. The net liquidity injection into the banking system is estimated at around 1.44 trillion naira.
Liquidity conditions could further improve, with the FMDA anticipating additional inflows of 3.12 trillion naira, with around 95% coming from OMO bond maturities. However, analysts believe that the impact of these flows will depend on the upcoming liquidity management operations conducted by the CBN.
