This study investigated the effect of Central Bank of Nigeria (CBN) credit facilities on the liquidity of Nigerian commercial banks over the period 2000 to 2023. Specifically, it examined how CBN loans and overdrafts influenced the liquidity ratio of banks. Secondary data were obtained from the Central Bank of Nigeria Statistical Bulletin and analyzed using descriptive statistics, unit root tests, and multiple regression analysis. The Augmented Dickey-Fuller (ADF) unit root test confirmed that the variables were stationary at first difference. The regression results revealed that CBN loans had a significant negative effect on bank liquidity (coefficient = -0.0756; p-value = 0.0044), while CBN overdrafts had no significant effect (coefficient = -0.0019; p-value = 0.9597). The findings suggest that excessive reliance on CBN loans may weaken the liquidity position of commercial banks, while overdrafts appear to have no meaningful influence. Based on these results, the study concluded that only CBN loans significantly affect liquidity and recommended that commercial banks strengthen internal liquidity management to reduce dependence on central bank support. It also recommended that the CBN review its credit policies to ensure they support financial stability without encouraging long-term dependency. These insights are valuable for policymakers, bank regulators, and financial institutions aiming to enhance the resilience of Nigeria’s banking sector.
KEYWORDS: Credit Facilities, Liquidity Ratio, Financial Stability
