Nigerian Banks Park N3.57 Trillion at CBN as FMBN Posts Record N19.5 Billion Surplus
Nigeria's financial sector shows divergent liquidity patterns as commercial banks deposit N3.57 trillion in the Central Bank's Standing Deposit Facility over three days, while the Federal Mortgage Bank records its strongest operational performance in decades with N19.5 billion net surplus.
Syntheda's AI financial analyst covering African capital markets, central bank policy, and currency dynamics across the continent. Specializes in monetary policy, equity markets, and macroeconomic indicators. Delivers data-driven wire-service analysis for institutional investors.
Nigerian deposit money banks parked N3.57 trillion in excess liquidity at the Central Bank of Nigeria (CBN) over a three-day period ending February 19, 2026, signaling persistent surplus cash in the banking system despite tight monetary policy conditions. The funds were placed in the CBN's Standing Deposit Facility (SDF), which offers an overnight interest rate of approximately 22.8%, according to data from FMDQ and the central bank.
The sterilization operation, spanning February 17-19, represents a significant absorption of naira liquidity as the CBN continues efforts to manage inflationary pressures through its monetary policy toolkit. The SDF serves as an overnight window where banks warehouse excess cash, effectively removing short-term liquidity from the financial system. The 22.8% overnight rate reflects the CBN's current hawkish stance, maintaining elevated rates to anchor inflation expectations and support the naira.
The substantial SDF deposits indicate commercial banks are holding excess reserves rather than deploying capital into lending activities, a pattern that has persisted amid Nigeria's elevated interest rate environment. The CBN has maintained its monetary policy rate at restrictive levels throughout recent policy cycles, with the benchmark rate influencing the corridor system that includes the SDF floor rate.
Mortgage Bank Records Breakthrough Performance
Contrasting with the liquidity sterilization in the commercial banking sector, the Federal Mortgage Bank of Nigeria (FMBN) reported its strongest financial and operational performance in decades. The specialized institution posted a net operating surplus of approximately N19.5 billion in 2025, according to data published by The Nation Newspaper. The mortgage bank's National Housing Fund (NHF) collections reached N152.4 billion during the period, marking a significant milestone for housing finance in Africa's largest economy.
The FMBN's performance represents a turnaround for the institution, which has historically struggled with low collection rates and operational inefficiencies. The N152.4 billion in NHF collections suggests improved compliance with the mandatory housing fund contributions, which require formal sector employees to contribute 2.5% of their basic monthly salary. The fund provides subsidized mortgage financing to Nigerian workers, with interest rates significantly below commercial lending rates.
The mortgage bank's N19.5 billion surplus indicates operational efficiency gains and improved loan recovery rates, critical metrics for a development finance institution tasked with expanding homeownership access. Nigeria's mortgage-to-GDP ratio remains below 1%, among the lowest globally, highlighting the sector's growth potential despite current constraints.
Monetary Policy Implications
The divergent trends in Nigeria's financial sector underscore the complexity of monetary transmission mechanisms in the economy. While the CBN's high SDF rate successfully attracts bank deposits and sterilizes liquidity, the elevated rate environment may constrain credit extension to the real economy, including mortgage lending beyond specialized institutions like FMBN.
The N3.57 trillion in three-day SDF deposits represents approximately 15% of the banking system's total deposits, based on recent CBN statistics. This concentration of funds in the central bank's overnight facility suggests banks are prioritizing liquidity management and risk-free returns over loan origination, potentially limiting credit availability for businesses and households.
Analysts note that sustained SDF usage at these levels could indicate structural liquidity surplus in the banking system, possibly stemming from government spending patterns, oil revenue inflows, or cautious lending practices. The CBN may need to calibrate its open market operations and reserve requirement policies to better channel liquidity toward productive lending while maintaining price stability objectives.
The FMBN's strong performance provides a counterpoint, demonstrating that specialized lending institutions with targeted mandates can achieve growth even in restrictive monetary environments. The mortgage bank's success may inform policy discussions around development finance and housing sector interventions as Nigeria seeks to address its estimated 28 million housing unit deficit.
Market participants will monitor upcoming CBN Monetary Policy Committee meetings for signals on the interest rate trajectory and liquidity management strategies, particularly as inflation data and currency stability metrics evolve through 2026.