Nigerian banks’ deposits with the Central Bank of Nigeria (CBN) climbed to ₦6.08 trillion on October 16, following a ₦2.41 trillion repayment of maturing Open Market Operations (OMO) bills that injected substantial liquidity into the banking system.
Data from the CBN’s daily banking system liquidity reports show that banks’ net placements at the apex bank’s Standing Deposit Facility (SDF) rose from about ₦3.86 trillion on October 13 to ₦6.08 trillion on October 16, an increase of ₦2.22 trillion, or 57.65 per cent, within four days.
The deposits remained above ₦6 trillion for three consecutive days, indicating that banks continued to place substantial surplus funds with the CBN after the repayment rather than immediately deploying the liquidity elsewhere.
The sharp increase followed the ₦2.408 trillion OMO repayment recorded on October 13. No fresh OMO sales were reported during the four-day period, leaving the maturity payment as the major recorded OMO transaction injecting funds into the financial system.
Banks’ SDF placements rose to approximately ₦6.065 trillion on October 14, eased slightly to ₦6.044 trillion on October 15, and increased to a four-day high of ₦6.083 trillion on October 16.
The SDF enables banks to deposit excess liquidity with the CBN and earn interest, making it one of the monetary authority’s instruments for managing short-term liquidity in the banking system.
Treasury bill sales absorb only part of liquidity
Government securities sales absorbed only a fraction of the funds released through the OMO repayment during the period.
The CBN recorded ₦269.06 billion in primary-market securities sales on October 15, matching the amount allotted at the October 14 Treasury bill auction. The Debt Management Office had received subscriptions of about ₦1.032 trillion but allotted only ₦269.06 billion, rejecting approximately 74 per cent of the bids.
Primary-market repayments stood at ₦109.96 billion, leaving a net liquidity absorption of ₦159.10 billion from those transactions.
When the primary-market transactions are combined with the ₦2.408 trillion OMO repayment, the recorded securities-related transactions produced a net liquidity injection of approximately ₦2.25 trillion over the period.
The figures indicate that Treasury bill sales did not absorb enough of the funds released by the maturing OMO bills to prevent a substantial increase in banks’ placements with the CBN.
Although the Treasury bill auction attracted more than ₦1 trillion in subscriptions, the actual amount allotted was considerably lower. Consequently, the volume of investor demand did not translate into an equivalent withdrawal of cash from the banking system.
Banks’ opening balances remain relatively stable
Despite the significant increase in SDF placements, banks’ opening balances changed only marginally during the period.
Opening balances rose from ₦195.08 billion on October 13 to ₦234.89 billion on October 14, before settling at ₦198.32 billion on October 16.
The contrast between relatively stable opening balances and deposits exceeding ₦6 trillion at the SDF suggests that much of the liquidity reflected in the reported figures remained parked at the CBN.
The absence of reported borrowing through the CBN’s Standing Lending Facility (SLF) during the period also points to banks placing surplus funds rather than seeking short-term liquidity support from the apex bank.
The latest figures highlight the effect of maturing monetary instruments on banking system liquidity and the CBN’s continuing role in managing excess funds through its deposit and open-market operations.
However, the increase in SDF placements alone does not establish that the entire amount released through the OMO repayment moved directly into the facility.
Source: Nairametrics
