CBN LIQUIDITY TIGHTENING CUTS BANKS’ CASH BY N3.86TN

 Nigeria’s banking system liquidity fell by N3.86tn following a fresh Open Market Operation conducted by the Central Bank of Nigeria, tightening cash conditions across the financial system.

Market data cited by AIICO Capital showed that system liquidity dropped by 65.53 per cent from N5.89tn to N2.03tn after the CBN offered N1tn in OMO bills.

Despite the sharp decline in available cash, the Nigerian Overnight Financing Rate remained at 22 per cent, in line with the prevailing policy rate. However, the overnight interbank lending rate rose slightly to 22.30 per cent from 22.19 per cent, indicating some pressure on short-term funding costs.

AIICO Capital said money market rates had remained relatively stable despite the reduction in system liquidity. The investment firm, however, warned that borrowing costs could rise if liquidity conditions tighten further.

A N57.42bn coupon payment expected to enter the financial system could provide some relief, according to Herwood Securities.

Meanwhile, treasury bill yields continued to rise in the secondary market. The average treasury bill rate increased to 18.81 per cent from 18.77 per cent as investors demanded higher returns.

AIICO Capital also reported that banks were holding 46.81 per cent less liquidity than at the beginning of 2026. Treasury bill yields, meanwhile, had risen by 1.81 percentage points over the same period.

The latest development reflects the CBN’s continued use of OMO operations to manage excess liquidity and influence short-term interest rates in the banking system.