CBN Faces N8.57tn Liquidity Surge as OMO, Bond Maturities Boost Banks

The Central Bank of Nigeria (CBN) could face a sharp rise in banking system liquidity this week as maturing Open Market Operations (OMO) bills and bond coupons inject about N2.59 trillion into the financial system.

The potential inflow could push net system liquidity to about N8.57 trillion, up from N5.98 trillion recorded at the end of last week.

Financial data showed that system liquidity rose from N2.86 trillion in the previous week to N5.98 trillion by Friday, September 25.

The latest increase came as banks continued to hold substantial surplus cash with the CBN through its Standing Deposit Facility (SDF).

Banks placed more than N7 trillion with the apex bank during the week, highlighting the level of excess liquidity in the system.

The banking sector also received about N2.3 trillion from OMO repayments on Tuesday, September 22.

Another N2.43 trillion in OMO bills is due for repayment this week. Bond coupon payments could add about N164 billion to the expected inflow.

Combined, the maturities and coupon payments could inject roughly N2.59 trillion into the system.

If banks retain the funds, the additional liquidity could lift the system’s net position to around N8.57 trillion.

The development comes shortly after the Monetary Policy Committee (MPC) cut the benchmark interest rate by 350 basis points to 23 per cent at its September 22 meeting.

Following the rate cut, money market rates declined as banks gained access to more liquidity.

The overnight rate fell by 147 basis points week-on-week to 20.77 per cent, while the funding rate dropped 160 basis points to 20.40 per cent.

Rates across the Nigerian Interbank Offered Rate (NIBOR) curve also declined during the period.

The liquidity build-up reflects a trend that has persisted through much of 2026, with banks repeatedly placing large amounts of surplus cash with the CBN despite the apex bank’s liquidity interventions.

The latest inflows could therefore provide another test of the CBN’s approach to managing excess liquidity.

The Treasury bills market has already responded to the lower interest-rate environment.

Yields in the secondary market fell across selected maturities after the MPC decision, with the biggest declines recorded at the longer end of the curve.

The average Nigerian Treasury Bills (NTB) yield dropped 90 basis points to 17.89 per cent.

At its latest NTB auction, the Debt Management Office (DMO) offered N500 billion across the 91-day, 182-day and 364-day bills.

Investors submitted subscriptions worth N4.2 trillion, while the DMO allotted N497 billion.

Stop rates fell to 15.50 per cent for the 91-day bill, 15.80 per cent for the 182-day instrument and 15.89 per cent for the 364-day bill.

The CBN also offered N1 trillion through an OMO auction on September 24.

The auction attracted N6.1 trillion in subscriptions, with the apex bank allotting N2.3 trillion.

There was no allotment for the 68-day instrument, while the 152-day and 180-day bills cleared at 17.29 per cent and 16.99 per cent respectively.

The strong demand came despite the decline in yields and followed heavy subscriptions recorded throughout the third quarter.

Under its Q3 2026 NTB issuance programme, the CBN allotted N8.14 trillion through auctions, exceeding the initial N5.8 trillion target by 40.34 per cent.

The latest liquidity injection could now put greater pressure on the apex bank to sterilise excess funds if it seeks to prevent a sharp decline in short-term market rates.

The September rate cut also came with a change to the Standing Facilities Corridor, which now stands at plus 50 and minus 300 basis points around the 23 per cent Monetary Policy Rate.

The adjustment places the Standing Lending Facility at 23.50 per cent and the Standing Deposit Facility at 20 per cent.

With liquidity expected to rise further this week, money market rates could remain close to the lower end of the new corridor.

However, additional OMO sales by the CBN could absorb part of the excess funds and moderate the rally in fixed-income securities.

The coming trading sessions will therefore show how the apex bank balances its more accommodative interest-rate policy with the need to keep liquidity within desired levels.

Source: Nairametric