Liquidity in Nigeria’s banking system rose 37.01 per cent to N8.84tn ahead of the settlement of the Central Bank of Nigeria’s latest Open Market Operation bills, increasing the amount of cash available to banks and setting the stage for a significant liquidity withdrawal.
Market data from AIICO Capital Limited showed that banking system liquidity increased from N6.45tn to N8.84tn, taking excess liquidity to more than twice the N3.82tn recorded at the beginning of the year.
The increase reflects the impact of OMO maturities and other inflows into the money market, despite the CBN’s continued efforts to absorb surplus cash through the sale of government securities.
The apex bank offered N2.5tn in OMO bills across three maturities on Tuesday, with strong investor demand reportedly pushing the eventual amount raised to about N5tn.
About N4.69tn of the OMO proceeds is expected to be debited from the banking system upon settlement, according to AIICO Capital.
The expected withdrawal represents more than half of the current N8.84tn liquidity pool and could tighten money-market conditions once the transaction is settled.
Despite the liquidity buildup, overnight borrowing costs recorded a modest increase. The overnight lending rate rose by 28 basis points to 20.86 per cent, while the overnight policy rate remained at 20.50 per cent.
The Nigerian Overnight Financing Rate stayed at 20 per cent, representing the lower boundary of the CBN’s current interest-rate corridor following its recent monetary policy easing.
The average Treasury bill rate also remained unchanged at 17.84 per cent, according to AIICO Capital.
AIICO Capital expects money-market rates to remain close to the 20 per cent floor as long as banking-system liquidity remains above N8tn.
However, the investment firm expects the settlement of the latest OMO transaction to significantly reduce the amount of cash available to banks.
The development comes as the CBN continues to rely on open-market operations to manage liquidity and influence short-term interest rates.
The strong demand for OMO instruments also points to continued investor appetite for high-yielding naira assets as monetary conditions adjust and investors assess returns across fixed-income markets.
