CBN tightens liquidity with N4.72trn OMO mop-up as banks hold N3.42trn

The Central Bank of Nigeria (CBN) withdrew a combined N4.72 trillion from the banking system through four Open Market Operations (OMO) auctions conducted on August 26 and 27, 2026, in a renewed effort to sterilise excess liquidity.

Despite the aggressive mop-up, substantial funds returned to the financial system through maturities of government securities, leaving banks with significant liquidity buffers.

Financial data from the CBN showed that investors subscribed N8.62 trillion to the four OMO auctions, more than four times the combined N2 trillion initially offered by the apex bank.

The 97-day instrument offered on August 26 attracted N783.49 billion in subscriptions, against N500 billion offered, with N613 billion allotted at a clearing rate of 19.90 per cent.

The 132-day OMO issued the same day generated the strongest demand, receiving N3.48 trillion in subscriptions, or 6.96 times the amount offered. The CBN allotted N2.18 trillion at 19.65 per cent.

On August 27, the 96-day OMO attracted N1.07 trillion in subscriptions, but only N160.46 billion was allotted at 19.85 per cent. The 152-day instrument received N3.29 trillion in subscriptions, with N1.77 trillion allotted at the lowest clearing rate of 19.32 per cent.

The strong demand for longer-tenor instruments despite their lower yields suggests that institutional investors are prioritising the certainty of locking in returns for longer periods, amid expectations about future interest rates and liquidity conditions.

Analysts said the latest OMO operations highlight the CBN’s continued use of market-based instruments to manage excess liquidity and influence short-term interest rates.

An economist familiar with the Nigerian fixed-income market, Buki Ogunlesi said the heavy oversubscription reflects the continued attractiveness of high-yielding CBN securities to institutional investors.

“The demand shows that liquidity remains abundant in the financial system, while investors are still willing to lock funds into relatively short-dated instruments at attractive yields,” the analyst said.

Another market analyst noted that the lower yield on the 152-day OMO compared with the shorter instruments could indicate investors’ expectations that rates may moderate over the medium term.

“The pricing pattern suggests investors are balancing current yields against expectations of future monetary policy. They appear comfortable accepting slightly lower yields for longer-tenor certainty,” the analyst said.

However, the OMO mop-up was partly offset by N4.302 trillion in primary market repayments during the two-day period. After accounting for N762.89 billion withdrawn through primary market sales, the banking system received a net N3.539 trillion injection from primary-market activities.

Consequently, the CBN’s N4.724 trillion OMO withdrawal resulted in an estimated net liquidity absorption of N1.185 trillion.