The lifting of limits on the standing deposit facility (SDF) by the CBN is a positive development for banks.
Prior to this ruling, commercial banks could only deposit a maximum of N2 billion per day with the Central Bank of Nigeria (CBN).
The SDF, on the other hand, is essentially a central bank savings account for banks. Banks can use the SDF to make additional deposits and receive interest from the central bank.
It is also one of the ways in which the central bank controls the amount of money in the system and influences the interest rate.
CBN removes deposit limit
According to Leadership, since the Central Bank of Nigeria (CBN) lifted the cap on SDFs, banks’ net deposits at CBN window have increased to N2,3 trillion as of October 2023, compared to the average monthly net borrowing amount of N1,4 trillion recorded so far this year.
On the other hand, Access Bank and other commercial banks such as United Bank for Africa (UBA), Zenith Bank, among others, have been exploring CBN deposit window opportunities to increase their profits.
According to the most recent monetary policy statement made in July of 2023, the interest rate on SDF deposits is 15.75 percent with an asymmetrical corridor of 100/- 300 basis points around 18.75 percent.
This means that the banks make more money in interest by depositing their extra cash with the central bank.
Source: Legit.ng
