In clear demonstrationof excess liquidity in thebanking system, banks deposit with the Central Bank of Nigeria, CBN, rose sharply by 1,578 percent year-on-year, YoY, to N53.5 trillion in the first five months of the year 5M25 from N3.19 trillion in the corresponding period of 2024 5M24.
The CBN has two short term lending windows for banks namely the Standing Lending Facility SLF and Repo lending.
It lends money to banks through the SLF at interest rate of 500 basis points bpts above the Monetary Policy Rate MPR, and it also lends money to banks through Repurchase Repo arrangement, which involves the purchase of banks securities with the agreement to sell back at a specific date and usually for a higher price.
On the other hand, the CBN accepts deposits from banks through its Standing Deposit Facility SDF and pays an interest rate of MPR minus 100 bpts .