The Central Bank of Nigeria (CBN) has announced plans to offer N2tn in Open Market Operations (OMO) bills as it seeks to reduce excess liquidity in the banking system.
The move follows a sharp rise in surplus funds, which climbed to N6.283tn in the week ended October 16, according to data from the Financial Markets Dealers Association (FMDA).
The figure represents a 69.39 per cent increase from the N3.709tn recorded in the previous week.
For the latest intervention, the apex bank scheduled an auction for Thursday, October 22, with N1tn each allocated to 138-day and 180-day bills.
OMO transactions allow the CBN to withdraw excess cash from the financial system by selling securities to banks and other financial institutions. The operations also help regulate liquidity and influence short-term interest rates.
The surge in liquidity was largely linked to repayments on maturing securities, including about N2.41tn in OMO bills that matured on October 13.
Banks’ net placements with the CBN’s Standing Deposit Facility consequently remained above N6tn through October 16. The facility enables eligible institutions to deposit surplus funds with the central bank and earn interest.
The FMDA estimated that OMO bills worth N2.067tn would mature in the week beginning October 19, increasing pressure on the CBN to sterilise excess funds.
The N2tn auction offer represents about 96.8 per cent of the projected maturities. Nevertheless, the amount ultimately removed from the banking system will depend on investor subscriptions and the CBN’s final allotment.
The 138-day bills are due to mature on March 9, 2027, while the 180-day instruments will mature on April 20, 2027.
The latest auction comes after the CBN’s October 6 OMO sale, where it allotted about N3.31tn, exceeding its initial offer of N2tn.
Investors submitted bids worth N3.51tn at the earlier auction, reflecting strong demand and the central bank’s readiness to accept subscriptions above the advertised amount.
The CBN accepted yields of 17.22 per cent for the 147-day bills and 16.92 per cent for the 182-day instruments. Both yields were below the levels recorded at the September 29 auction.
Investors and market operators are expected to closely monitor the latest sale for signals on the CBN’s willingness to absorb surplus liquidity and the returns investors will demand on its short- and medium-term instruments.
In September, the central bank sold N17.51tn in OMO bills against maturities of N10.89tn, producing an estimated net liquidity withdrawal of N6.62tn.
The latest offer highlights the CBN’s continued use of OMO instruments to manage liquidity after the significant increase in excess funds across the banking system.
However, the N2tn offer will not automatically translate into an equivalent reduction in banking system liquidity. The final allotment, repayments on maturing instruments and other financial flows will determine the net effect.
The auction may also offer further indications of investor demand for CBN securities and whether yields will extend the decline recorded at the previous sale.
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