Excess Liquidity: Banks Lodge N3.7trn Cash With Central Bank

Nigerian commercial banks dumped about N3.7 trillion in idle cash at the Central Bank of Nigeria (CBN) on December 24, signalling deep excess liquidity in the banking system on the eve of Christmas.

Data released by the apex bank covering December 22 to 24, 2025 shows that lenders moved aggressively to park surplus cash with the CBN, marking one of the largest single-day SDF inflows recorded in recent months.

The surge came barely two days after the CBN conducted a N1.7 trillion Open Market Operation (OMO) on December 22, a move aimed at mopping up excess liquidity. Despite that intervention, banks were still awash with cash, forcing them to channel funds into the standing facility rather than deploy them elsewhere.

The development reflects a combination of seasonal factors and limited short-term lending opportunities, as financial institutions traditionally rebalance their books toward year-end.

With credit demand subdued and risk considerations heightened during the holiday period, banks opted to hold funds at the CBN, even at relatively modest returns.

Why this matters

The N3.7 trillion parked by banks at the CBN is not idle money in theory, it is money that could have gone into loans for businesses, mortgages, agriculture, and consumer spending, especially during a peak festive period like Christmas.

It shows that monetary policy is not fully translating into credit growth. Even after the CBN’s N1.7 trillion OMO mop-up, banks still preferred to deposit cash with the apex bank rather than lend to the economy. That choice reflects risk aversion, weak demand, or structural bottlenecks in credit transmission.

The surge happened just before Christmas, when consumer spending typically peaks. Excess cash sitting at the CBN instead of circulating in the economy suggests missed short-term growth momentum, particularly for retail, trade, and small businesses that depend on seasonal demand.

It further raises questions about policy efficiency and cost. Funds placed in the SDF earn interest paid by the CBN, meaning public resources are used to absorb private-sector liquidity. Over time, this can add to the central bank’s financial burden while doing little to stimulate productive investment.

The N3.7 trillion dump is not just a banking statistic; it is a mirror of credit conditions, policy transmission, and confidence in the economy at a critical moment in the year.