By Boluwatife Oshadiya | May 22, 2026
Key Points
- Nigerian Overnight Financing Rate remained unchanged at 22% on Thursday
- Banking system liquidity declined to ₦5.69 trillion after Treasury bills settlement
- Average Treasury bills yield eased to 17.46% amid stronger investor demand
Main Story
Nigeria’s Overnight Financing Rate (NOFR) closed steady at 22% on Thursday despite fluctuations in banking system liquidity driven by Treasury bills settlements and funding activities in the money market.
Market analysts said the overnight risk-free reference rate continued to reflect prevailing liquidity conditions within the financial system, where short-term funding costs have fluctuated between 20.50% and 22% during the week.
According to AIICO Capital Limited, the banking system opened Thursday with a liquidity surplus of ₦5.69 trillion, down from ₦6.21 trillion recorded in the previous session. The decline was largely attributed to the settlement of ₦829.33 billion from the Nigerian Treasury bills auction conducted earlier in the week.
The outflow outweighed inflows of ₦634.47 billion from the maturity of the 21 May 2026 Treasury bill, resulting in tighter liquidity conditions across the banking sector.
Despite the decline, liquidity levels remained robust as financial institutions maintained significant placements at the Central Bank of Nigeria’s Standing Deposit Facility window, which totalled ₦5.80 trillion during the session.
Meanwhile, banks facing temporary liquidity shortages accessed ₦221 million through the Standing Lending Facility window.
Cowry Asset Management said overnight funding costs remained mixed. The Overnight rate rose by four basis points to 22.18%, while the Open Repo rate remained unchanged at 22%.
Activity in the Treasury bills secondary market closed mixed as yields on the three-month and 12-month instruments rose by 11 basis points and 10 basis points respectively. However, the one-month tenor declined by 19 basis points, while the six-month tenor closed flat.
Overall average Treasury bills yield eased by three basis points to 17.46%, reflecting stronger investor demand across the fixed-income market.
The Issues
Nigeria’s money market conditions have remained heavily influenced by the Central Bank’s liquidity management strategy, including Treasury bills issuance, Open Market Operations auctions and cash reserve requirements.
The elevated level of short-term interest rates reflects the apex bank’s tight monetary policy stance aimed at controlling inflation and stabilising the foreign exchange market. However, persistently high funding costs continue to increase borrowing expenses for banks and businesses, potentially slowing credit growth across the economy.
What’s Being Said
“Liquidity conditions remain relatively healthy despite the impact of Treasury bills settlements,” AIICO Capital Limited said in its market commentary.
“Money market funding costs were divergent as the Overnight rate edged higher while Open Repo rates remained stable,” Cowry Asset Management noted.
Independent fixed-income analyst Ayodeji Ebo said market participants remain focused on liquidity tightening measures by the apex bank. “The settlement of OMO auctions is likely to moderate system liquidity further in the next session,” he said.
What’s Next
- Analysts expect liquidity conditions to tighten further following settlement of the Central Bank’s Open Market Operations auction
- Investors will continue monitoring Treasury bills yields and interbank funding rates for signals on monetary conditions
- The market is also awaiting future liquidity guidance ahead of upcoming debt market auctions and CBN policy actions
Bottom Line
The Bottom Line: The stability of the NOFR at elevated levels underscores the Central Bank’s continued tight monetary policy stance. While liquidity in the banking system remains strong, rising funding costs and ongoing liquidity tightening measures could sustain pressure on borrowing conditions across the economy.
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