The Central Bank of Nigeria (CBN) has intensified its liquidity management efforts, withdrawing about N6.88 trillion from the banking system through Open Market Operations (OMO) auctions within the first two weeks of June as it seeks to curb excess liquidity and contain inflationary pressures.
Financial market data indicate that the amount mopped up represents roughly 63 per cent of the N10.90 trillion projected to flow into the banking system this month. The anticipated inflows are largely driven by maturing OMO bills, Federal Account Allocation Committee (FAAC) disbursements, and Treasury Bills repayments.
According to projections by the Financial Markets Dealers Association (FMDA), OMO maturities alone are expected to inject about N7.77 trillion into the financial system in June, accounting for more than 70 per cent of total anticipated inflows.
To offset the anticipated liquidity surge, the apex bank conducted OMO auctions on June 2, June 8 and June 11, attracting subscriptions exceeding N7.2 trillion. Total successful allotments across the auctions amounted to N6.88 trillion, reflecting strong investor appetite for high-yield government securities.
Market data showed that investors largely favoured longer-dated OMO instruments, particularly those with maturities above 130 days, while shorter-tenor bills attracted relatively weaker demand despite offering attractive stop rates.
At the June 2 auction, the 133-day OMO bill drew subscriptions worth N2.482 trillion—more than twelve times the N200 billion initially offered. The CBN eventually allotted N2.409 trillion under the instrument, making it the largest liquidity withdrawal recorded during the review period.
Similarly, the June 8 auction saw a 134-day OMO bill attract subscriptions of N1.605 trillion, all of which were allotted. Another 138-day instrument recorded subscriptions of N1.84 trillion, accounting for a significant share of total investor demand.
Stop rates across the auctions ranged between 19.98 per cent and 21.89 per cent, underscoring sustained investor interest in OMO securities despite the prevailing tight monetary environment.
The latest liquidity mop-up follows an estimated N12.06 trillion withdrawn from the financial system in May. Despite those efforts, average system liquidity reportedly rose to N5.22 trillion, highlighting the challenge facing monetary authorities in managing surplus funds within the banking sector.
Apart from maturing OMO bills, June inflows are expected to be supported by FAAC allocations estimated at N1.80 trillion and Treasury Bills maturities approaching N1 trillion.
Analysts note that the strong oversubscription levels recorded in recent auctions suggest that liquidity remains abundant in the banking sector, while elevated yields continue to attract investors to fixed-income instruments.
With more than half of the projected June inflows already sterilised through OMO sales, market observers expect the CBN to remain active in the money market throughout the remainder of the month to sustain its inflation-control strategy and preserve prevailing monetary conditions.
The FMDA had earlier projected that total inflows into the financial system would rise to N10.90 trillion in June, slightly above the N10.53 trillion recorded in May, reinforcing the need for continued liquidity management interventions by the apex bank.
FAAC
