CBN’s mop-up fails to halt banks’ N8.31tn liquidity build-up

The Central Bank of Nigeria’s efforts to drain excess liquidity from the banking system are facing renewed pressure, as banks’ deposits at the apex bank climbed to N8.31tn despite a fresh Open Market Operations auction.

Data from the CBN showed that banks deposited N8.311tn in its Standing Deposit Facility on Friday, 6  November, 2026, up N347.44bn from the previous day.

The increase came on the same day the regulator absorbed N724.32bn through an OMO auction, highlighting the continued accumulation of surplus funds within the financial system.

Banks’ SDF placements rose by N1.345tn between 4 November and 6 November, suggesting that the liquidity build-up is persisting despite the central bank’s interventions.

The trend could prompt further liquidity withdrawal operations as the regulator seeks to manage monetary conditions and prevent excess cash from undermining its policy objectives.

The CBN offered N1tn in two OMO instruments but received subscriptions of N1.887tn, nearly twice the amount offered.

Despite the strong demand, the apex bank allotted only N724.32bn, leaving N1.163tn of bids unaccepted.

The 179-day bill attracted N741.62bn in bids, with N405.62bn allotted at a stop rate of 17.25 per cent.

The 270-day instrument received N1.146tn in subscriptions, but the CBN accepted only N318.70bn at a stop rate of 16.54 per cent.

The relatively low allotment suggests that the regulator was selective in determining how much liquidity to absorb and the rates at which it was willing to do so.

The auction was also significantly smaller than the 3 November operation, when the CBN allotted approximately N2.95tn.

The increase in SDF placements coincided with a sharp decline in banks’ opening balances.

Opening balances dropped from N612.06bn on 4 November to N194.10bn on 6 November, representing a decline of N417.96bn.

The simultaneous movements suggest that banks are transferring more of their available funds into the CBN’s deposit facility.

The SDF allows banks to earn interest on surplus funds placed with the apex bank, making it an alternative to deploying excess liquidity in other short-term investments.

However, the growing balance raises questions about whether available liquidity is translating into increased credit to businesses and households.

The liquidity build-up comes ahead of substantial expected inflows into the banking system.

The Financial Markets Dealers Association projects approximately N13.79tn in November inflows, largely from OMO maturities, FAAC allocations and Treasury bills repayments.

Banking system liquidity also increased by 56.75 per cent to N7.373tn in October from N4.703tn in September.

The expected inflows could complicate the CBN’s liquidity management efforts, particularly if banks continue to place substantial amounts of surplus cash at the apex bank.

Market participants will be watching whether the regulator increases its OMO interventions in the coming weeks or maintains its selective approach to liquidity withdrawal.