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Banks reduced their overnight placements with the Central Bank of Nigeria (CBN) by N941.85 billion on October 7, 2026, taking deposits under the Standing Deposit Facility (SDF) to N3.76 trillion from N4.70 trillion the previous day.
The sharp reduction, equivalent to about 20 per cent of the previous day’s balance, was the largest single-day decline since September 30. It also took banks’ SDF placements below the N4 trillion mark after the balance had remained above that level through most of the recent period.
According to data from the apex bank, banks’ overnight deposits had risen to N4.86 trillion on October 5, before easing to N4.70 trillion on October 6. The balance then fell by N941.85 billion to N3.76 trillion on October 7.
The latest movement followed a period of elevated liquidity placements in September, when banks repeatedly parked more than N6 trillion with the apex bank overnight.
SDF deposits reached N7.34 trillion on September 23 and peaked at N7.52 trillion on September 24. The balance fell to N5.90 trillion on September 25, before rising to N6.01 trillion on September 28 and N6.28 trillion on September 29.
It dropped to N4.55 trillion on September 30, representing a one-day decline of N1.73 trillion. The October 7 balance of N3.76 trillion is N3.76 trillion below the September 24 peak, underscoring the considerable volatility in banks’ overnight liquidity positions across individual trading days.
The SDF is an overnight, non-collateralised liquidity-absorption facility through which banks and other deposit-taking institutions place surplus funds with the CBN and earn interest. It is one of the apex bank’s key instruments for managing excess cash in the banking system and supporting short-term liquidity stability.
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A reduction in SDF placements indicates that banks held a lower volume of idle funds overnight with the CBN. Such a movement may reflect increased deployment of funds into other money-market instruments, lending activity, payment obligations or other liquidity needs.
However, the CBN’s daily SDF data does not, on its own, identify the specific driver of the withdrawal. System liquidity can shift sharply from one trading day to another, particularly around government revenue distributions, maturity of financial instruments, open market operations and other funding flows.
The latest development also came against the backdrop of the CBN’s recent monetary-policy reset. At its 307th meeting on September 22, the Monetary Policy Committee (MPC) reduced the Monetary Policy Rate (MPR) by 350 basis points, from 26.5 per cent to 23 per cent.
The Committee also recalibrated the Standing Facilities Corridor to +50 basis points and -300 basis points around the MPR. This placed the Standing Lending Facility rate at 23.5 per cent, while the SDF rate declined to 20 per cent from 23 per cent.
Despite the reduction in the benchmark rate, the MPC retained key reserve requirements. The cash reserve requirement (CRR) remained at 45 per cent for deposit money banks and 16 per cent for merchant banks, while the 75 per cent CRR on non-Treasury Single Account public-sector deposits was also maintained.
The retention of the reserve requirements means that the rate cut did not immediately release additional liquidity from compulsory reserves. Rather, the adjustment realigned the benchmark rate and the corridor around it, while leaving the volume of funds locked in reserves broadly unchanged.
Experts say banks’ SDF balances will remain a useful indicator of liquidity conditions in the financial system. A sustained decline could suggest that banks are deploying more surplus funds into lending or higher-yielding instruments, while renewed increases would signal a build-up of idle cash in the system.
