Deposits by Nigerian banks and merchant banks with the Central Bank of Nigeria declined sharply in April 2026, falling by 28.4 per cent to N92.32 trillion from N128.9 trillion recorded in March, following recent monetary policy adjustments by the apex bank.

The drop comes after the Monetary Policy Committee reduced the Monetary Policy Rate from 27 per cent to 26.50 per cent, a move analysts say has influenced how banks manage excess liquidity and lending decisions.

Financial data from the Central Bank of Nigeria also showed that deposits stood at N61.11 trillion in February, rising from N52.6 trillion in January before surging in March and easing significantly in April.

Banks typically channel surplus funds into the CBN’s Standing Deposit Facility, where they earn overnight interest on idle cash. The window has remained attractive for lenders seeking low-risk returns, especially in a business environment marked by uncertainty.

Analysts noted that the reduction in deposits is linked to the lower Monetary Policy Rate and a changing interest rate corridor, which has adjusted returns on the Standing Deposit Facility and encouraged banks to reassess where they place excess funds.

Despite the April decline, Nigerian banks deposited an estimated N334.95 trillion with the apex bank in the first four months of 2026, representing a massive year-on-year increase compared to the same period in 2025.

At the same time, borrowing by banks from the CBN through its Standing Lending Facility dropped sharply to N2.2 trillion during the same period, down from N43.42 trillion recorded a year earlier, reflecting stronger liquidity positions across the banking sector.

Market analysts say banks are increasingly prioritising safe investment options amid global economic pressures, rising business risks, and uncertainty in lending conditions. This has made the CBN’s deposit window a preferred destination for excess liquidity rather than aggressive lending into the real sector.

Investment banker Tajudeen Olayinka explained that in uncertain times, banks naturally seek secure opportunities that minimise default risk, with the CBN standing out as one of the safest options.

He added that while this strategy helps preserve liquidity, it could also slow private sector lending, keep borrowing costs high, delay inflation reduction, and pose challenges for broader economic growth if sustained over time.