By Boluwatife Oshadiya | May 25, 2026
Key Points
- Banking system liquidity declined to N2.79 trillion from N3.82 trillion after OMO and Treasury Bills settlements
- Strong investor demand persisted at the latest NT-Bills auction, with subscriptions hitting nearly N2 trillion
- Analysts expect liquidity levels to remain elevated this week on the back of N1.97 trillion OMO maturities
Main Story
Liquidity in Nigeria’s banking system moderated last week as outflows linked to Open Market Operations (OMO), Treasury Bills settlements, and Federal Government bond auction debits reduced excess cash balances across the financial system.
Data from market analysts showed that system liquidity fell week-on-week to N2.79 trillion from N3.82 trillion despite significant inflows from maturing Treasury Bills and OMO instruments valued at N934.47 billion.
According to Cowry Asset Management Limited, the decline reflected the Central Bank of Nigeria’s continued liquidity mop-up strategy aimed at tightening monetary conditions and controlling inflationary pressures.
Additional inflows of N2.46 billion from OMO repayments on Friday helped cushion liquidity pressures, while funding conditions across the money market remained relatively stable.
The Nigerian Overnight Financing Rate (NOFR) held steady at 22% during the week, according to AIICO Capital, while the overnight funding rate eased by six basis points week-on-week to 22.24%. The Open Buy Back (OPR) rate also closed unchanged at 22%.
Short-term liquidity conditions improved slightly as overnight NIBOR declined by five basis points. However, longer-tenor rates moved higher, signalling tighter expectations further along the curve. Cowry Asset noted that the one-month, three-month, and six-month NIBOR climbed by 32 basis points, 94 basis points, and 114 basis points respectively.
In the Treasury Bills market, bearish sentiment persisted amid selective selloffs at the mid- and long-end of the curve. Average NT-Bills yields edged higher by two basis points week-on-week to 17.52%.
At the latest primary market auction, the Debt Management Office offered N650 billion across standard maturities but recorded subscriptions of nearly N2 trillion, underscoring sustained investor appetite for fixed-income securities despite elevated interest rates.
The DMO eventually allotted N829.3 billion, with stop rates closing at 15.95% for 91-day bills, 16.14% for 182-day bills, and 16.15% for 364-day instruments.
The Issues
The liquidity moderation reflects the CBN’s broader monetary tightening campaign aimed at curbing inflation and stabilising the naira. Since 2024, the apex bank has intensified OMO issuances and aggressive fixed-income auctions to absorb excess liquidity from the financial system.
However, elevated liquidity levels continue to coexist with high borrowing costs, creating a challenging environment for businesses and private sector credit growth. While banks remain liquid, tighter monetary conditions have pushed lending rates higher and increased financing costs for corporates.
The strong demand recorded at Treasury Bills auctions also highlights investor preference for risk-free government securities over equities and private sector lending, particularly amid macroeconomic uncertainty and elevated inflation.
What’s Being Said
“Despite the moderation, funding conditions remained broadly robust, with system liquidity still elevated at N2.79 trillion,” Cowry Asset Management Limited said in its market note.
“The sustained liquidity surplus helped ease short-term funding pressures,” AIICO Capital stated in its weekly market update.
Independent analysts also noted that investors continue to rotate aggressively into fixed-income instruments as elevated yields offer attractive real returns compared with other asset classes.
What’s Next
- Analysts expect approximately N1.97 trillion in OMO maturities to enter the financial system this week
- Coupon payments worth N35.26 billion from the 28-Nov-2028 FGN Bond are also expected to support liquidity
- Market participants anticipate additional CBN liquidity mop-up actions if excess system liquidity remains elevated
The Bottom Line: Nigeria’s banking system remains highly liquid despite aggressive CBN tightening measures, underscoring the scale of excess liquidity still circulating within the financial sector. However, persistent liquidity mop-ups and elevated yields continue to reinforce a high-interest-rate environment that may constrain private sector borrowing and economic expansion.
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