The Central Bank of Nigeria (CBN) has reported a significant uptake of its liquidity mopping instruments, with a total of N14.4 trillion staked by financial institutions and institutional investors in May. This development comes as small businesses in Nigeria continue to struggle with accessing funding. According to the CBN Economic Report for May, the apex bank offered N3.6 trillion in Open Market Operations (OMO) auctions, which attracted a substantial subscription of N14.4 trillion.
The CBN regularly conducts OMO auctions to manage excess liquidity in the financial system. In May, the bank allotted N12.54 trillion out of the N14.4 trillion subscribed, indicating a high demand for its liquidity mopping instruments. This was more than the N10.6 trillion that chased after N3 trillion OMO bills in April, of which N9.51 trillion was allotted. The higher-than-expected subscription reflected liquidity surfeit and attractive returns, according to the CBN.
The stop rates for the OMO auctions ranged between 19.97 and 21.90 per cent, compared with 19.85 and 21.90 per cent in the preceding period. The activity at the standing facilities window reflected the liquidity conditions in the review period, with banks' deposits with the CBN far outweighing their lending from the window. Data showed that the total utilisation of the Standing Lending Facility (SLF) slowed to N0.02 trillion in May, from N0.05 trillion in April.
The decline in placements at the Standing Deposit Facility (SDF) window, despite higher liquidity, reflected liquidity absorption through open market operations. Total OMO allotments rose by 31.86 per cent relative to the level in April 2026. The average banking system liquidity rose in May, buoyed by maturing CBN bills, bond coupon payments, and fiscal injections. The average net liquidity in the banking system stood at N5.53 trillion, a 17.16 per cent increase from N4.72 trillion in the preceding period.
The increase in liquidity was driven largely by inflows from maturing CBN bills, bond coupons, and disbursements by the Federation Account Allocation Committee (FAAC). Liquidity conditions were further shaped by Cash Reserve Requirement (CRR) maintenance and foreign exchange-related activities, supporting stability in short-term interest rates. The CBN's liquidity mopping instruments have been instrumental in managing excess liquidity in the financial system.
The significant uptake of the CBN's liquidity mopping instruments by financial institutions and institutional investors highlights the current liquidity conditions in the financial system. The apex bank's efforts to manage excess liquidity have been successful, with total OMO allotments increasing significantly in May. However, small businesses continue to face challenges in accessing funding, which could impact their operations and growth.
The CBN's data also showed that banks' deposits with the apex bank stood at N86.3 trillion in May, a significant increase from the previous month. The decline in demand for overnight liquidity support by deposit money banks, as reflected in the lower utilisation of the SLF, indicates that banks are managing their liquidity effectively. The CBN's liquidity management efforts are crucial in maintaining stability in the financial system and supporting economic growth.
Key points
- The Central Bank of Nigeria's liquidity mopping instruments attract N14.4 trillion in subscriptions.
- Small businesses in Nigeria continue to struggle with accessing funding.
- The CBN's liquidity management efforts support stability in short-term interest rates.
