Nigeria’s banking system liquidity remained firmly above N8 trillion this week, underscoring the resilience of excess funds despite an aggressive N2.36 trillion Open Market Operations (OMO) mop-up by the Central Bank of Nigeria (CBN).
Mid-week data from the apex bank show that the sizeable liquidity withdrawal—executed at the March 23, 2026 OMO auction—had only a brief tightening effect on system balances.
At the start of the week, system liquidity was estimated at over N8.06 trillion. Following the OMO intervention, opening balances on March 23 dropped sharply to N85.04 billion, indicating an immediate but short-lived squeeze.
However, liquidity conditions rebounded quickly. By Wednesday, March 25, funds parked at the CBN’s Standing Deposit Facility (SDF) had climbed to about N7.98 trillion, reflecting a rapid return of surplus liquidity into the system.
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The scale of the OMO issuance—typically deployed to absorb excess cash, elevate yields, and ease pressure on the foreign exchange market—appears to have had limited lasting impact, as underlying inflows continued to drive system liquidity higher.
A major anchor of this liquidity surplus remains sustained activity at the SDF window, where banks deposit idle funds for risk-free returns. Data indicate that SDF balances opened the week at N8.17 trillion, dipped to N6.59 trillion on March 24, and rose again to N7.97 trillion by March 25.
This persistent recycling of funds into the CBN deposit facility highlights banks’ preference for safe, short-term yields, supported by an attractive overnight rate of roughly 22.28%.
Analysts say the pattern points to structural excess liquidity, driven largely by inflows from maturing instruments and limited absorption capacity via OMO auctions. Recent maturities—including about N1.44 trillion and N579 billion in securities—have further amplified system liquidity.
The implication is that current liquidity management tools may require sustained and possibly larger-scale deployment to achieve tighter monetary conditions.
Elevated liquidity levels pose risks to interest rate stability and could heighten inflationary pressures if left unchecked. There are also concerns that persistent surplus funds may spill into speculative activities in the foreign exchange market.
Overall, the data reinforce expectations that the Central Bank of Nigeria will need to maintain an aggressive and consistent OMO strategy in the near term to stabilise liquidity and broader market conditions.
Nairametrics
