Lending Apathy Persists As Banks Deposit N30trn With CBN In 5 Days

Nigerian banks have lodged a whopping N30 trillion with the Central Bank of Nigeria (CBN) in the past five days, underscoring the ongoing reluctance to lend to the real economy amid high interest rates and economic uncertainties.

This massive deposit surge, revealed in recent CBN data, highlights persistent liquidity hoarding despite efforts to stimulate credit growth and support businesses.

Data from the market showed that deposit money banks placed about N30.64 trillion with the CBN through the Standing Deposit Facility (SDF) window within five trading sessions.

The huge deposits at the apex bank came amid persistent liquidity pressure in the financial system, with the average liquidity deficit settling at N5.7 trillion, slightly wider than the N5.1 trillion recorded in the previous week.

The breakdown of SDF placements showed that banks deposited N5.20 trillion on Monday, N5.27 trillion on Tuesday, N6.96 trillion on Wednesday, N6.69 trillion on Thursday, and N6.51 trillion on Friday, bringing the five-day total to N30.639 trillion, higher than the N26.161 trillion recorded in the preceding week.

According to analysts, the large deposits reflect banks’ cautious liquidity management amid elevated short-term interest rates. Despite the tight liquidity environment, the overnight rate (OPR) remained unchanged at 22.0 per cent, while the overnight lending rate climbed by 12 basis points week on week to 22.3 per cent.

At the Treasury bills primary market, the apex offered N850 billion across the 91-day, 182-day and 364-day instruments. Market data showed that the 91-day bill recorded an offer of N100 billion but attracted N130.7 billion in allotments, while the 182-day instrument had an offer of N150 billion and attracted N71.4 billion in allotments. The 364-day paper dominated the auction with N600 billion on offer and N731.8 billion allotted.

Overall demand stood at N2.8 trillion, translating to a 3.3 times bid-to-offer ratio, with investor appetite largely concentrated on the 364-day instrument, which recorded 4.3 times subscription. Stop rates settled at 16.0 per cent for the short tenor and 16.7 per cent for both the mid and long dated instruments, while total allotment came to N933.9 billion, about 9.9 per cent above the initial offer.

Meanwhile, activities in the secondary Treasury bills market turned bearish during the week as yields advanced by 10 basis points to close at 17.9 per cent. The upward movement in yields was largely driven by selloffs across the mid and long segments of the curve, where yields expanded by 48 basis points and 4 basis points, respectively, to 18.2 per cent and 19.6 per cent. In contrast, yields on short-dated bills declined by 23 basis points to 16.0 per cent.

Analysts at Cordros Capital noted that the bearish sentiment in the secondary market was largely influenced by tight liquidity conditions in the banking system. “For the week ahead, we expect a mild bearish tilt in the secondary Treasury bills market, driven by continued tight liquidity conditions,” the analysts said in an emailed note.

However, the analysts projected that liquidity in the banking system could improve in the coming days, supported by expected inflows from maturing instruments.

According to them, inflows of about N1.06 trillion from OMO maturities, N398.65 billion from Federal Government bond coupon payments, and N700 billion from the March 2026 bond redemption are expected to boost system liquidity.

They added that the expected inflows could place downward pressure on short-term rates. “This substantial liquidity injection should exert downward pressure on the overnight rate, although a potential OMO auction and net Treasury bills allotment could partly temper the pace of the decline,” the analysts stated.