Nigeria’s banking sector is experiencing a noteworthy shift as the cost of funds declines, prompting a 12% year-on-year reduction in borrowing from the Central Bank. Figures from the First Eight Months of 2025 reveal that banks and merchant lenders accessed ₦69.37 trillion, down from ₦79.23 trillion during the same period in 2024.
The Standing Lending Facility (SLF)—the primary medium through which banks borrow from the Central Bank—has seen significant pullback. This trend coincides with a sharp increase in deposits via the Standing Deposit Facility (SDF), which surged over 200% to ₦79.84 trillion, up from just ₦10.35 trillion in the corresponding period last year.
This suggests that healthier liquidity levels across the banking system are reducing reliance on expensive central bank funding and improving financial resilience.
- Lower borrowing costs: With reduced dependence on the SLF, whose interest rate is set at 500 basis points over the MPR, banks can avoid costly funding routes.
- Increased deposit growth: Massive growth in deposits at the CBN indicates heightened liquidity, potentially enabling banks to redirect funds into lending or other productive assets.
- Potential easing of lending rates: While borrowing costs remain a major factor in retail interest rates, the shift away from pricey CBN credit could eventually lead to more favorable loan terms for businesses and consumers.
The trend reflects improved liquidity and encourages optimism for broader financial stability. As banks continue to recalibrate their funding strategy—favoring internal liquidity over costly borrowing from the apex bank—the potential for more competitive lending rates and economic growth emerges.
For policymakers and industry watchers, sustaining this momentum hinges on further enhancements to the banking system’s liquidity and regulatory frameworks.
