The Central Bank of Nigeria (CBN) has offered ₦2 trillion in Open Market Operations (OMO) bills to absorb excess cash from the banking system as funds held by lenders at its deposit facility rose to ₦7.9 trillion.
The move comes amid concerns over declining private-sector credit, which fell by ₦537.6 billion in September. The drop has raised questions about whether the CBN’s monetary policy measures are translating into more loans for businesses.
At Thursday’s auction, the apex bank offered ₦2 trillion in 138-day and 180-day bills. Investors submitted bids worth ₦2.7 trillion, prompting the CBN to allot ₦2.6 trillion, above its initial offer.
The stop rates settled at 17.63 per cent for the 138-day bills and 17.14 per cent for the 180-day instruments, showing continued demand for short-term investments with attractive returns.
Meanwhile, the banking system’s net liquidity surplus increased to ₦6.94 trillion from ₦6.28 trillion the previous week, after reaching ₦8.4 trillion during the review period. Maturing OMO bills contributed about ₦2.1 trillion, while Treasury bills maturities and primary market repayments added ₦392.8 billion and ₦330 billion, respectively.
Despite the surplus, overnight funding rates remained broadly stable. The overnight rate eased slightly to 20.36 per cent, while the funding rate stayed at 20 per cent.
However, rates in the Nigerian Interbank Offered Rate (NIBOR) market rose across all reported periods. The six-month rate climbed by 126 basis points to 21.54 per cent, while the three-month rate increased to 21.09 per cent.
Treasury bills yields showed mixed movements, with the average secondary market yield rising by three basis points to 17.93 per cent.
The continued build-up of banking system liquidity highlights a key challenge for the CBN. Although banks hold substantial excess cash, this has not prevented a decline in lending to the private sector.
Businesses, especially manufacturers and small enterprises that depend on loans for working capital and expansion, remain exposed to high borrowing costs.
Further liquidity movements will depend on maturing securities and fresh government debt sales in the coming week.
Can the CBN reduce excess liquidity while encouraging banks to lend more to businesses?
