To Control Liquidity, CBN Raises Rates For Standing Deposit Facility

The Standing Deposit Facility (SDF) rates have been raised by the Central Bank of Nigeria (CBN) as part of its continuous attempts to control liquidity in the banking sector.

Following the approval of significant changes to interest rate policy at the 296th Monetary Policy Committee (MPC) meeting, a circular outlining this decision was released on August 26, 2024.

The Monetary Policy Rate (MPR) Asymmetric Corridor was adjusted by the CBN from +100/-300 basis points (bps) to +500/-100 bps. With this big change, the central bank hopes to deter banks from hoarding surplus cash and encourage more lending.The Standing Lending Facility (SLF) rate, which banks use to borrow short-term funds from the CBN, has been raised to 31.75%.

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The SDF rate, applicable to deposits made by banks at the CBN, has been increased to 25.75%. The circular also specifies that:

Commercial and Merchant Banks will receive 25.75% on deposits up to ₦3.00 billion, while deposits exceeding this amount will attract a lower rate of 19.00%.

Payment Service Banks will receive 25.75% on deposits up to ₦1.50 billion, with amounts above this threshold earning 19.00%.

These new rates are effective immediately, with all authorized dealers expected to adhere to the updated guidelines.