Surplus cash more than doubles from its January level as investors snap up about N5tn in OMO bills…..
Liquidity across Nigeria’s banking system has risen to N8.84tn, setting the stage for a significant cash withdrawal when the Central Bank of Nigeria settles its latest Open Market Operation transactions.
The latest figure represents a 37.01 per cent increase from the N6.45tn previously recorded, according to market data from AIICO Capital Limited.
The sharp buildup means excess liquidity in the financial system is now more than twice the N3.82tn recorded at the start of the year, reflecting the impact of maturing OMO instruments and other inflows into the money market.
The increase comes as the CBN continues efforts to prevent excess cash from exerting downward pressure on short-term interest rates through the sale of government securities.
On Tuesday, the apex bank offered N2.5tn worth of OMO bills across three maturities. Strong demand from investors, however, reportedly pushed the total amount raised to about N5tn.
The settlement of the transaction is expected to absorb a substantial portion of the excess cash currently circulating in the banking system, with market participants watching closely for its effect on short-term funding costs.
Despite the liquidity surplus, overnight borrowing costs edged higher.
Market data showed that the overnight lending rate increased by 28 basis points to 20.86 per cent, while the Overnight Policy Rate remained at 20.50 per cent.
The Nigerian Overnight Financing Rate, however, held steady at 20 per cent, maintaining its position at the lower end of the CBN’s current interest-rate corridor following the recent easing of monetary policy.
The average Treasury bill rate was also unchanged at 17.84 per cent, according to AIICO Capital.
The investment firm expects money-market rates to remain around the 20 per cent floor while banking-system liquidity stays above N8tn.
That outlook could change significantly once the latest OMO transaction is settled.
AIICO Capital estimates that approximately N4.69tn will be withdrawn from the financial system through the settlement, potentially leaving banks with considerably less excess cash than the current N8.84tn position.
The size of the expected debit makes the transaction particularly significant for the money market, as banks adjust their cash positions and reassess funding conditions following the liquidity drain.
The recent surge also underscores the continuing role of OMO operations in the CBN’s management of banking-system liquidity, particularly as monetary conditions adjust following changes in the policy-rate environment.
At the same time, the strong demand for the latest OMO bills points to continued investor appetite for naira-denominated assets offering relatively attractive yields, even as the direction of monetary policy evolves.
