Banks across Nigeria rushed to deposit billions in the Central Bank’s Standing Deposit Facility (SDF).
The SDF offers an overnight interest rate of about 22.8%, so it attracts surplus cash.
Banks Flock To SDF
On February 17, 2026, system liquidity exceeded ₦4 trillion, prompting the CBN to launch aggressive mop-up operations.
By February 19, the bank had absorbed over ₦3.57 trillion through OMO, primary market issuances, and SDF placements.
Midweek, liquidity strengthened, closing at ₦4.32 trillion on Friday, while SDF deposits jumped sharply.
Banks maintained high SDF deposits, rising from ₦2.52 trillion at the week’s start to ₦4.26 trillion.
CBN Absorbs Trillions
On February 17, the CBN absorbed a net ₦435 billion after OMO sales of ₦2.30 trillion.
Then, on February 19, it sold treasury bills and bonds totalling ₦1.91 trillion, exceeding repayments of ₦765.89 billion.
Meanwhile, banks kept nearly ₦3 trillion in daily SDF placements throughout the mop-up operations.
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Moreover, direct market instruments accounted for about ₦1.57 trillion in withdrawals during the same period.
Managing Surplus Liquidity
Analysts say elevated liquidity reflects structural and fiscal factors rather than immediate funding stress.
In addition, Standing Lending Facility usage remained minimal, and opening balances stayed modest relative to policy absorptions.
Olubunmi Ayokunle of Augusto & Co explained that liquidity is fine but must remain manageable.
He added that high government spending naturally creates liquidity, so the central bank must manage it carefully.
FAAC allocations, previous government borrowing, and economic recovery contributed to the liquidity build-up.
Also, funds released for projects often return to banks, boosting cash reserves.
Finally, the CBN’s sterilisation drive incurs fiscal costs but helps control inflation and excess liquidity.
While stabilising prices, large-scale mop-ups increase borrowing costs, potentially slowing economic recovery.
