H1: Banks Borrowing from CBN Shrink by 96.04% YoY to N2.33trn

Nigerian banks have drastically reduced their borrowing from the Central Bank of Nigeria (CBN), with a year-on-year drop of 96.04% to N2.33 trillion in the first half of 2026. This significant decrease, down from N58.91 trillion in the same period of 2025, suggests a marked improvement in liquidity within the banking sector and a diminished need to access the CBN's Standing Lending Facility (SLF) for overnight obligations.

The CBN's data reveals a more cautious approach by banks, particularly after the apex bank withdrew regulatory forbearance. This has led banks to become more selective in extending credit to critical sectors. Despite the reduced borrowing, the Monetary Policy Committee (MPC) maintained the Monetary Policy Rate (MPR) at 26.50% in its May 2026 meeting, with the Standing Facilities corridor set around the MPR. This means banks typically borrow at 22.5% per annum through the SLF when in need of overnight liquidity.

Conversely, banks have increased their deposits with the CBN through the Standing Deposit Facility (SDF) window. In the first half of 2026, these deposits reached an estimated N511 trillion, a substantial rise from N68.94 trillion in the first half of 2025. The SDF offers attractive overnight interest, making it a preferred option for banks seeking risk-free returns. March 2026 saw the highest bank deposit figure at approximately N128.92 trillion, with a notable 479.4% year-on-year increase in total deposits by June 2026 compared to June 2025.

Analysts attribute the reduced borrowing and increased deposits to factors including the CBN's February 2026 cut in the MPR to 26.50% and a lower opportunity cost of holding cash with the CBN compared to lending it out. Cordros Research analysts noted that the adjustment in the asymmetric corridor around the MPR is expected to ease monetary conditions and strengthen banks' private sector credit expansion.

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The adjustment is expected to ease monetary conditions and strengthen banks’ private sector credit expansion.