CBN introduces single-tier standing deposit facility rate at 26.50%

In a bid to streamline its monetary policy operations, the Central Bank of Nigeria (CBN) has introduced a single-tier remuneration structure for its Standing Deposit Facility (SDF).

This means all deposits under the SDF will now earn interest at the Monetary Policy Rate (MPR) minus 100 basis points. With the current MPR set at 27.50 percent, this translates to a fixed SDF rate of 26.50 percent.

This policy change was announced through a circular issued by Omolara O. Duke, director of the financial markets department, and is effective immediately. The circular directed all authorised financial institutions to note and comply with the revised structure, which replaces the previous framework.

Previously, the SDF operated under a two-tier system. Deposits up to N3 billion earned interest at the MPR minus 100 basis points, while deposits exceeding N3 billion were remunerated at a significantly lower rate of 19 percent. The dual-rate system was designed to manage excess liquidity in the banking system by discouraging banks from parking large sums with the CBN.

Read also: CBN sets new guidelines for Interbank FX trading via EFEMS

However, during its 298th Monetary Policy Committee (MPC) meeting, the Committee decided to abolish the two-tier structure. Instead, it adopted a single-tier system to ensure uniformity and simplicity. This decision was part of broader monetary policy measures to maintain the asymmetric corridor around the MPR at +500/-100 basis points, a structure that influences interest rate movements and helps guide the financial market.

This circular also rescinds an earlier directive issued on August 26, 2024, which had introduced the SDF’s symmetric corridor. The new policy, according to the CBN, is aimed at enhancing transparency and consistency in its monetary operations, aligning with efforts to strengthen the efficiency of Nigeria’s financial system.

Authorised dealers and financial institutions have been urged to implement this adjustment immediately, as the CBN continues to refine its tools to achieve monetary stability and maintain the flow of liquidity within the economy.