Banks deposit with the Central Bank of Nigeria, CBN, rose sharply by 783.7 percent, year-on-year, YoY, to N79.8 trillion in the first seven months of the year 7m25 from N9.03 trillion in the corresponding period of 2024 7m24, indicating excess liquidity in the banking system.
CBN has two short term lending windows for banks, namely, the Standing Lending Facility SLF and Repurchase 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 also lends money to banks through 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 apex bank accepts deposits from banks through its Standing Deposit Facility SDF and pays an interest rate of MPR minus 100 bpts.