Liquidity conditions within Nigeria’s financial system tightened significantly during the week following aggressive liquidity management operations by the Central Bank of Nigeria (CBN), which reportedly mopped up approximately ₦3.9 trillion through Open Market Operations (OMO) and Treasury bills auctions.
At the start of the week, system liquidity had exceeded the ₦4 trillion threshold, allowing deposit money banks to place excess funds at the CBN’s Standing Deposit Facility (SDF), where they earn an interest rate of 22.5 per cent on sterilised balances.
However, liquidity levels were sharply reduced after the apex bank conducted OMO and Nigerian Treasury Bills auctions, a key monetary policy tool used to limit banks’ lending capacity and moderate credit creation within the economy.
While activity at the Standing Lending Facility (SLF) remained relatively subdued, market participants recorded pockets of borrowing pressure midweek following the settlement of ₦2.7 trillion worth of OMO bills, which significantly constrained available liquidity.
As market conditions adjusted, interbank liquidity moderated to a net long position of ₦1.20 trillion on Thursday, down from ₦1.65 trillion recorded the previous day, reflecting the impact of the CBN’s intervention.
Auction data released by the central bank showed that about ₦3.9 trillion was withdrawn from the financial system over a two-day period. Liquidity in the interbank market was further strained by the settlement of ₦1.14 trillion for newly issued Treasury bills, which exceeded inflows of ₦514.25 billion from maturing bills.
Although repayments from matured Treasury bills and an increase of about ₦1.85 trillion in banks’ placements at the CBN’s deposit facility window provided some relief, these inflows were insufficient to fully offset the liquidity outflows from auction settlements.
By the close of trading on Thursday, average funding costs eased slightly by four basis points to 22.61 per cent. The Open Repo Rate (OPR) remained unchanged at 22.50 per cent, while the overnight lending rate declined by eight basis points to 22.71 per cent.
In the secondary market, Treasury bills trading remained relatively quiet, although yields showed a mild bearish trend. Average benchmark yields rose by seven basis points to 17.72 per cent. A similar pattern was observed in the OMO segment, where average benchmark yields expanded by 10 basis points to close at 21.11 per cent.
Market analysts noted that the sustained liquidity tightening reflects the CBN’s commitment to monetary discipline and inflation management, even as it continues to balance financial system stability with broader economic objectives.
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