Nigeria’s banking system could see a significant increase in liquidity this week, with net system liquidity potentially rising to about ₦8.57 trillion following an estimated ₦2.59 trillion injection from maturing Open Market Operations (OMO) bills and bond coupon payments.
An analysis of Central Bank of Nigeria (CBN) financial data shows that net system liquidity had already risen to ₦5.98 trillion in the week ended Friday, September 25, from ₦2.86 trillion in the preceding week.
The projected increase comprises about ₦2.43 trillion in OMO maturities and ₦164 billion in bond coupon payments. If the funds are fully retained within the banking system, the additional liquidity could push total system liquidity to approximately ₦8.57 trillion.
The development could place renewed pressure on the CBN to deploy liquidity-management tools, including further OMO sales, as it seeks to prevent excess cash from driving short-term money-market rates significantly below its newly recalibrated policy corridor.
Banks park over ₦7tn at SDF
The liquidity build-up was already evident last week, as banks placed more than ₦7 trillion with the CBN through the Standing Deposit Facility (SDF).
The significant SDF placements highlight the amount of surplus cash available within the banking system despite the CBN’s continued liquidity-management operations.
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The banking system also received about ₦2.3 trillion from OMO repayments on Tuesday, September 22, contributing significantly to the improvement in system liquidity.
Another ₦2.43 trillion in OMO maturities is scheduled for settlement this week, potentially providing another substantial injection into the financial system.
The developments come against the backdrop of the CBN’s decision to cut its Monetary Policy Rate (MPR) by 350 basis points from 26.5% to 23% at its September 2026 Monetary Policy Committee meeting.
The apex bank also recalibrated its Standing Facilities Corridor to +50/-300 basis points around the new MPR, setting the Standing Lending Facility at 23.50% and the Standing Deposit Facility at 20.00%.
Money-market rates decline
Money-market rates responded to the combination of abundant liquidity and the lower policy rate.
The overnight rate declined by 147 basis points week-on-week to 20.77%, while the funding rate fell by 160 basis points to 20.40%, with declines also recorded across the Nigerian Interbank Offered Rate (NIBOR) curve.
The trend could continue if the projected liquidity injection remains in the system, potentially keeping short-term rates close to the lower end of the CBN’s newly adjusted corridor.
However, aggressive liquidity sterilisation through additional OMO sales could moderate the impact of the liquidity surplus on money-market rates.
Treasury bills reprice after MPR cut
The Treasury bills market also responded sharply to the CBN’s rate decision, with yields falling across the curve.
At the Treasury bills auction, the Debt Management Office (DMO) offered ₦500 billion across the 91-day, 182-day and 364-day maturities, attracting about ₦4.2 trillion in subscriptions before allotting approximately ₦497 billion.
Stop rates fell to 15.50% for the 91-day bill, 15.80% for the 182-day instrument and 15.89% for the 364-day bill.
The secondary Treasury bills market also turned decisively bullish following the MPC’s easing decision, with the strongest repricing recorded at the longer end of the curve.
Yields contracted by 29 basis points, 114 basis points and 123 basis points across selected maturities, pulling the average Nigerian Treasury Bills yield down by 90 basis points to 17.89%.
OMO auction attracts ₦6.1tn demand
Demand for OMO securities remained strong following the rate cut.
At the CBN’s OMO auction on Thursday, September 24, 2026, the apex bank offered ₦1 trillion across the 68-day, 152-day and 180-day maturities.
The auction attracted approximately ₦6.1 trillion in subscriptions, before the CBN allotted ₦2.3 trillion.
No allotment was recorded for the 68-day instrument, while the 152-day and 180-day bills cleared at 17.29% and 16.99%, respectively.
The heavy oversubscription despite falling yields reflects strong investor demand for fixed-income securities even as the market adjusts to the CBN’s more accommodative monetary policy stance.
The development also comes against the backdrop of the CBN’s Q3 2026 NTB issuance programme, under which ₦8.14 trillion was allotted across the quarter’s auctions, representing 40.34% above the ₦5.8 trillion originally targeted.
CBN sterilisation faces fresh test
The potential rise in system liquidity presents a fresh test for the CBN’s liquidity-management strategy following its latest policy decision.
The September MPC decision to cut the MPR by 350 basis points to 23% marked the sharpest single-meeting reduction of the current easing cycle.
The rate cut, combined with substantial OMO maturities and bond coupon payments, could leave banks with significantly more cash available for lending, investment and money-market activities.
However, the CBN may need to balance the benefits of increased liquidity with the risk of excessive cash pushing short-term interest rates sharply lower.
Continued sterilisation through additional OMO sales could therefore moderate the pace of the ongoing fixed-income rally and help keep money-market rates within the desired policy corridor.
The projected ₦8.57 trillion liquidity position would represent one of the highest levels recorded this year and comes at a critical point for monetary policy transmission.
The coming trading sessions will therefore provide an early test of how aggressively the CBN uses sterilisation tools to manage liquidity while allowing its newly recalibrated, more accommodative monetary policy stance to transmit through the financial system.
