Prof. Uche Uwaleke, the President, Capital Market Academics of Nigeria, says that banks’ lower deposits in the Central Bank of Nigeria (CBN), may have been caused by possible deployment of funds into lending and other investments.
Uwaleke said this in an interview with News Agency of Nigeria (NAN) in Abuja on Sunday.
He said that more available liquidity may had been deployed into government securities and other financial market activities rather than being parked at the apex bank in Nigeria.
Reports quoting CBN’s financial data for end of October, showed that banks’ deposits with the apex bank through the Standing Deposit Facility (SDF) fell by 87 per cent month-on-month to N1.22 trillion in October 2026 from N9.4 trillion in September.
The data also showed that banks’ borrowing from the CBN through its Standing Lending Facility (SLF) declined by 98 per cent month-on-month to N15 billion in October from N920 billion in September.
Uwaleke attributed the decline in the deposits with the CBN to reduced surplus liquidity in October, adding that it suggested that banks had significantly less surplus liquidity to place with the CBN in October than they did in September.
The expert said that possible factors which may had contributed to the decline included increased liquidity absorption by the CBN through monetary policy operations, changes in government cash flows and increased demand for credit in Nigeria in October to date.
Uwaleke said that adjustments in banks’ liquidity management strategies could also explain the development, alongside the impact of prevailing monetary policy conditions in the system.
According to him, the development is potentially positive, but should be viewed in the broader context of financial system stability and economic impact in Nigeria and across the wider economy.
He said the decline suggested less reliance on the CBN’s standing facilities with banks managing their liquidity positions more efficiently across the banking system.
He added that the development should not be interpreted as evidence of improved financial intermediation without proof of increased lending to productive sectors.
Uwaleke said that what mattered was whether banks were channelling more funds into productive sectors, supporting businesses, creating jobs and expanding credit to the private sector.
”While the development is encouraging, its real significance will depend on how it translates into improved economic activities nationwide,” he said.
On the decline in banks’ borrowing from the CBN through the Standing Lending Facility, he said it was also an encouraging development for the financial system.
Uwaleke said the sharp decline suggested that banks had less need to approach the CBN for emergency or overnight liquidity support during the period.
”The decline could indicate improved liquidity management, better distribution of liquidity within the banking system and reduced funding pressures on banks”.(NAN)
