Nigeria’s banking system is set for a sharp rise in liquidity this week, with net cash levels potentially climbing to around N8.57 trillion from Monday, 28 September. The expected surge follows a possible N2.59 trillion injection from maturing Open Market Operations (OMO) bills and bond coupon payments.
Net system liquidity had already strengthened to N5.98 trillion in the week ended Friday, 25 September, up from N2.86 trillion the previous week, according to analysis of Central Bank of Nigeria data. The projected increase is powered by N2.43 trillion in OMO maturities and N164 billion in bond coupons. Banks parked more than N7 trillion at the Standing Deposit Facility during the past week, highlighting the large surplus of cash still sitting in the system.
Liquidity Build-Up Accelerates
Roughly N2.3 trillion flowed into the banking system from OMO repayments on Tuesday, 22 September. Another N2.43 trillion in OMO maturities is due for settlement this week. Combined with N184 billion in bond coupon payments that settled earlier on Monday, 21 September, the potential total injection reaches N2.594 trillion. If retained in full, this would lift net system liquidity to approximately N8.57 trillion.
Money-market rates reacted quickly to the excess liquidity and the Monetary Policy Committee’s decision on 22 September to cut the benchmark rate by 350 basis points to 23 per cent. The overnight rate dropped 147 basis points week-on-week to 20.77 per cent, while the funding rate fell 160 basis points to 20.40 per cent. Declines were also recorded across the NIBOR curve.
The build-up fits a pattern observed throughout 2026, in which banks have continued to place large volumes of cash with the CBN through the Standing Deposit Facility even after significant liquidity withdrawals.
Treasury Bills Market Turns Bullish
The secondary Treasury bills market became firmly bullish after the rate cut. The sharpest yield declines occurred at the longer end of the curve, with contractions of 29, 114 and 123 basis points on selected maturities. Average Nigerian Treasury Bills yield fell 90 basis points to 17.89 per cent.
At the recent NTB auction the Debt Management Office offered N500 billion across the 91-day, 182-day and 364-day tenors. Subscriptions reached N4.2 trillion, but only N497 billion was allotted. Stop rates cleared at 15.50 per cent for the 91-day bill, 15.80 per cent for the 182-day paper and 15.89 per cent for the 364-day instrument.
On Thursday, 24 September, the CBN offered N1 trillion in OMO bills across the 68-day, 152-day and 180-day maturities. The auction attracted N6.1 trillion in bids and resulted in an allotment of N2.3 trillion. No paper was allotted on the 68-day tenor; the 152-day and 180-day bills cleared at 17.29 per cent and 16.99 per cent respectively.
The strong oversubscription even as yields declined mirrors the broader third-quarter NTB programme. The CBN allotted N8.14 trillion across the quarter’s auctions 40.34 per cent above the original N5.8 trillion target.
Sterilisation Policy Faces Fresh Test
The 350-basis-point reduction in the Monetary Policy Rate to 23 per cent was the largest single-meeting cut in the current easing cycle. The Standing Facilities Corridor was also adjusted to +50/-300 basis points around the new MPR, placing the Standing Lending Facility at 23.50 per cent and the Standing Deposit Facility at 20.00 per cent.
Treasury bill stop rates fell across all tenors immediately after the decision, with the secondary market continuing to reprice lower. Overnight and funding rates are expected to trade nearer the lower end of the revised corridor while system liquidity remains high. Further OMO sales by the CBN could, however, slow the pace of the fixed-income rally.
The projected N8.57 trillion liquidity level would rank among the highest recorded this year, coming after the CBN’s third-quarter NTB programme closed well above target. The sessions ahead will offer an early indication of how forcefully the central bank intends to use sterilisation tools to manage the surplus cash and transmit its more accommodative policy stance.
