Money market rates tighten as OMO, T-bills drain liquidity

By Boluwatife Oshadiya | September 30, 2026

Key Points

• CBN Treasury bill and OMO settlements reduced the financial system’s liquidity surplus to ₦3.57 trillion
• Average funding cost increased eight basis points week-on-week to 22.13%
• Overnight lending rate rose 15 basis points to 22.25% despite a substantial liquidity buffer

Main Story

Nigeria’s money market tightened as Central Bank of Nigeria (CBN) Treasury bill and Open Market Operation (OMO) settlements absorbed liquidity, reducing the system surplus to ₦3.57 trillion.

According to Cowry Asset Limited, the intermarket credit balance fell from an opening surplus of ₦4.35 trillion after Treasury bill settlements generated ₦1.45 trillion in debits, while OMO settlements accounted for another ₦2.60 trillion.

The CBN also sterilised about ₦2.5 trillion through an OMO auction, although approximately ₦2.48 trillion from maturing OMO bills flowed back into the financial system. The combined transactions left the banking system with a sizeable liquidity surplus but tightened short-term funding conditions.

Cowry Asset reported that average funding cost increased eight basis points week-on-week to 22.13%. The overnight lending rate also rose 15 basis points to 22.25%, while the Open Repo Rate remained unchanged at 22.00%.

Some banks turned to the CBN’s Standing Lending Facility to meet short-term funding needs, borrowing ₦15.80 billion during the period, according to Cowry Asset.

Financial system liquidity opened at ₦4.07 trillion and peaked at ₦6.81 trillion, supported by OMO maturities and bank placements at the CBN’s Standing Deposit Facility window.

What’s Being Said

Cowry Asset Limited attributed the moderation in liquidity to the combined impact of Treasury bill and OMO settlement debits, partly offset by OMO maturities. The firm’s assessment indicates that the system retained a substantial liquidity cushion even as overnight funding costs moved higher.

What’s Next

Market participants will continue to monitor the CBN’s liquidity-management operations, including future Treasury bill and OMO settlements and maturities.

The direction of interbank liquidity and overnight funding rates will remain important indicators of whether the current tightening is temporary or develops into a broader change in short-term funding conditions.

Bottom Line

The money market remains liquid, but the latest movements show that aggregate liquidity does not automatically translate into cheaper short-term funding. CBN sterilisation through OMO and Treasury bill operations is tightening conditions at the margin, keeping interbank rates elevated despite the sizeable system surplus.