The Business NG - August 03, 2025

Bu sayıda

Editorial Focus | BusinessNG | Monday, August 4, 2025

A worrying shift is taking root in Nigeria’s banking sector as commercial banks increasingly opt to park their funds with the Central Bank of Nigeria (CBN) rather than lend to the real sector. With total deposits at the CBN hitting N79.8 trillion in July 2025—a staggering 783% year-on-year rise—it’s clear that the apex bank’s liquidity management strategy is distorting lending behavior.

The CBN’s recent adjustment to the Standing Deposit Facility (SDF), offering more attractive yields, has turned risk-free returns into a preferred option for banks. Lending to businesses and households, long viewed as a growth engine, is now seen as less attractive compared to guaranteed CBN returns.

This policy-induced credit freeze undermines private-sector expansion, worsens access to finance, and could stall Nigeria’s fragile economic recovery. Regulators must urgently recalibrate incentives to rechannel bank liquidity toward productive sectors of the economy before the damage becomes systemic.