Commercial banks significantly reduced the volume of funds lodged at the Central Bank of Nigeria’s (CBN) Standing Deposit Facility (SDF) window last week, dropping placements by 40% as overall system liquidity declined sharply.
The contraction came as the CBN intensified its open market operations (OMO), issuing large volumes of OMO bills across two primary market auctions in an effort to withdraw excess cash and replace maturing short-term instruments.
Throughout the week, the monetary authority actively supplied OMO and Nigerian Treasury Bills to investors, targeting a reduction of idle liquidity within the financial system. Despite the aggressive mop-up, market liquidity remained positive, closing Friday at N1.31 trillion, although significantly lower than previous levels.
Since the adjustment of the monetary policy asymmetric corridor in September, banks with limited lending appetite have consistently channelled surplus liquidity into the SDF at a return of 24.50%, which analysts say currently outweighs yields on Nigerian Treasury Bills.
Liquidity opened the week at a robust N3.9 trillion, boosted by heavy DMB flows into the SDF. This was further supported by N2.09 trillion in FAAC disbursements and additional inflows from OMO and treasury bill maturities. However, several sterilisation auctions—designed to absorb excess liquidity—counteracted the expansion.
A major liquidity withdrawal followed a N3 trillion OMO auction, surpassing the N1.4 trillion OMO maturities recorded. Net Treasury Bill settlements amounting to N400.47 billion further pressured system liquidity.
To roll over maturing bills, the CBN allotted N1.1 trillion in Treasury Bills across all standard tenors during its Wednesday auction. By week’s end, available liquidity had fallen by 78.8%, sliding from N6.17 trillion the previous week to N1.31 trillion, according to Cowry Asset Limited.
Analysts at Cowry Asset note that the slowdown reflects banks’ sustained preference to park idle funds with the CBN rather than deploy them into the wider financial market, a pattern that continues to shape short-term funding dynamics. TrustBanc Financial Group reported that banks’ average placements fell to N2.51 trillion, down from N4.17 trillion a week prior.
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