Nigerian banking liquidity surges to over N6 trillion

Excess liquidity in the Nigerian banking system has surged, with net liquidity surplus rising by over 55% to approximately N6 trillion. This increase was primarily driven by the Central Bank of Nigeria (CBN) repaying N2.41 trillion in matured Open Market Operations (OMO) securities.

Banks have largely opted to place these excess funds into the CBN’s Standing Deposit Facility (SDF) rather than increasing lending or other short-term investments. Data indicates that net placements at the SDF rose from roughly N3.86 trillion to over N6 trillion during the mid-October period.

Market analysts anticipate further liquidity boosts totaling approximately N5 trillion from Federation Account Allocation Committee (FAAC) inflows, matured OMO bills, and Nigerian Treasury bills. While the elevated liquidity provides relief to money market funding conditions, short-term rates remain relatively high. To manage this surplus and control rates, the CBN may float OMO bills for subscription to mop up excess funds.