Nigerian deposit money banks accessed over N9 trillion from the Central Bank of Nigeria (CBN) last week as liquidity pressures intensified, driven by a surge in outflows and limited inflows into the financial system.
The liquidity strain began in March following a significant Open Market Operation (OMO) auction and Treasury bill debits, which depleted banking reserves. As a result, market rates remained elevated, with the banking sector deficit reaching approximately N2 trillion by Friday. The prolonged liquidity crunch forced banks to demand higher rates on available funds, further driving up borrowing costs.
Interbank rates also reflected the tightening conditions. The Nigerian Interbank Offered Rate (NIBOR) edged up by 0.07 percentage points, closing at 32.90%, while the Open Repo Rate peaked at 32.50% midweek before settling at 32.40%. Overnight lending rates followed a similar trend, rising steadily to end the week at 32.90%, according to data from the FMDQ platform.
Despite a brief improvement in liquidity at the start of the week, the financial system slipped into a deeper deficit as funding pressures mounted. The market received N254.8 billion in Federal Government of Nigeria (FGN) bond coupon inflows, but these were offset by Nigerian Treasury bill (NTB) auction settlements, limiting the overall impact on liquidity.
By Friday, the banking sector’s liquidity deficit had expanded by 7% to N1.96 trillion, compared to a lower deficit of N700.29 billion at the beginning of the week, according to TrustBanc Financial Group. This deterioration was largely attributed to FX sales settlements and NTB auction debits totaling N503.92 billion.
To bridge the liquidity gap, deposit money banks turned to the CBN’s Standing Lending Facility (SLF), borrowing N9.15 trillion to sustain operations. As a result, average system liquidity settled at a net short position of about N2 trillion ahead of anticipated inflows from the Federal Account Allocation Committee (FAAC) in the coming week.
Looking ahead, analysts expect liquidity conditions to remain tight as FGN bond Primary Market Auction (PMA) debits, estimated at N300 billion, are projected to exceed inflows from FGN bond coupon payments of N202 billion.
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