The Central Bank of Nigeria (CBN) has increased the Standing Deposit Facility (SDF) rates in its sustained efforts to efficiently manage liquidity in the economy and ensure continued stability of the financial system.
This decision, which was contained in a circular issued on August 26, 2024 to deposit money banks (DMBs), is a further demonstration of its resolve to sustain its hawkish policy stance amid economic whirlwinds, particularly the surging inflation rate in the country.
According to the circular, which takes immediate effect, DMBs and Merchant Banks will receive 25.75% on deposits up to N3.00 billion, while deposits exceeding this amount will attract a lower rate of 19.00%.
Also, Payment Service Banks (PSBs) will receive 25.75% on deposits up to N1.50 billion, with amounts above this threshold earning 19.00%.
At its last 296th meeting, the apex bank’s MPC revised the Asymmetric Corridor around the Monetary Policy Rate (MPR) from +100/-300 basis points (bps) to +500/-100 bps.
The decision of the committee was taken partly to discourage banks from holding excess liquidity at the central bank and to promote increased lending activities.
Specifically, banks use SLF rate to borrow short-term funds from the CBN, and under the new policy, the rate has been raised to 31.75%.
Analysts believe that the jacking up of the SLF, apart from helping the apex bank to mop up excess liquidity in the system, it will make banks to review the rates charged on facilities to customers, amongst other benefits.
