Banks’ deposits with the Central Bank of Nigeria (CBN) surged far above their borrowings from the apex bank in the second quarter of 2026, as transactions through the Standing Deposit Facility (SDF) window rose to N48.40 trillion, compared with N7.97 trillion through the Standing Lending Facility (SLF).

The N40.43 trillion gap highlights the scale of excess liquidity in the banking system during the period, with banks placing substantially more funds with the CBN than they accessed through its lending window.

The CBN disclosed this in its Q2 2026 Economic Report, which also showed that foreign exchange inflows through the banking system increased by 20.38 per cent to US$10.02 billion, from US$8.32 billion in the preceding quarter.

While activities at the SLF window fell by 83.92 per cent, transactions through the SDF increased by 153.93 per cent, indicating a sharp shift in banks’ liquidity positions during the review period.

The applicable rates at the standing facilities were maintained at 32.50 per cent for the SLF, equivalent to the Monetary Policy Rate (MPR) plus 5 percentage points, and 26.50 per cent for the SDF, representing MPR minus one percentage point.

The interest rate on converted Intra-day Lending Facility transactions to the SLF was also retained at 37.50 per cent, or MPR plus 10 percentage points.

However, following the September 2026 meeting of the Monetary Policy Committee, the CBN recalibrated the Standing Facilities Corridor to +50/-300 basis points around the new MPR of 23 per cent. This puts the SDF rate at 20 per cent and establishes a new floor for overnight market rates.

The banking sector maintained strong liquidity and solvency indicators during the period. The industry liquidity ratio stood at 55.03 per cent, significantly above the 30 per cent regulatory minimum, indicating substantial capacity to meet maturing obligations and support credit intermediation.

Similarly, the capital adequacy ratio stood at 13.43 per cent, above the regulatory minimum of 10 per cent, pointing to continued capacity to absorb credit and market shocks.

However, asset quality remained an area requiring monitoring, as the non-performing loans ratio edged up by 0.09 percentage point to 5.63 per cent, slightly above the prudential limit of five per cent. The CBN nevertheless assessed overall asset quality as broadly stable.

On the foreign exchange market, inflows through banks rose to US$10.02 billion, while autonomous inflows declined by 15.79 per cent to US$17.39 billion from US$20.65 billion.

Outflows through banks fell by 6.99 per cent to US$9.82 billion from US$10.54 billion, while autonomous outflows declined by 6.93 per cent to US$3.01 billion from US$3.23 billion.

Consequently, autonomous sources recorded a net inflow of US$14.38 billion, compared with US$17.41 billion in the preceding quarter. The banking system also recorded a net inflow of US$195.65 million, a significant improvement from the US$2.21 billion net outflow recorded in Q1 2025.

Average turnover at the Nigerian Foreign Exchange Market (NFEM) increased by 8.75 per cent to US$459.04 million from US$422.09 million, reflecting stronger trading activity amid ongoing foreign exchange market reforms.

The report also showed that merchandise import bills moderated to US$9.26 billion from US$10.34 billion, driven by declines in both oil and non-oil imports.

Petroleum products imports fell to US$2.58 billion from US$3.57 billion, which the CBN attributed partly to improved domestic refining capacity and reduced dependence on imported petroleum products.

Non-oil imports also declined to US$6.68 billion from US$6.77 billion, mainly due to lower machinery and raw material imports. Non-oil products accounted for 72.14 per cent of total merchandise imports, while oil products accounted for the balance.

In terms of foreign exchange utilisation, the industrial sector, particularly raw materials and machinery, accounted for the largest share of merchandise imports at 43.95 per cent.

This was followed by the oil sector with 27.87 per cent, manufactured products at 11.11 per cent, food products at 10.66 per cent, transport at 4.67 per cent, minerals at 1.15 per cent and agricultural products at 0.59 per cent.

Clarify the quarter-to-quarter comparisons

Separate Q2 findings from September decisions

Sharpen the investor and banking implications

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