CBN drains N4.72trn in 48 hours as investors chase 19.9%

Nigeria’s money market saw another aggressive liquidity squeeze as the Central Bank of Nigeria (CBN) absorbed N4.72 trillion from the banking system in just two days, even as investors submitted N8.62 trillion in bids for Open Market Operations (OMO) securities offering yields of almost 20 per cent.

The heavy demand and large allotments underscore the continued appetite for high-yielding naira assets and the CBN’s determination to actively manage excess liquidity in the financial system.

Across four OMO auctions conducted on August 26 and 27, 2026, the apex bank offered a combined N2 trillion but ultimately allotted about N4.72 trillion, representing more than double the advertised amount.

Investor subscriptions were more than four times the total offer, highlighting strong demand for short- and medium-term CBN securities.

The highest yield was recorded on the 97-day instrument, which cleared at 19.90 per cent.

At the August 26 auction, the CBN received N783.49 billion in subscriptions for the 97-day OMO against N500 billion offered and allotted N613 billion.

The same day, the 132-day instrument attracted N3.48 trillion, almost seven times the N500 billion offer. The CBN allotted N2.18 trillion at a final rate of 19.65 per cent.

On August 27, the 96-day OMO attracted N1.07 trillion, more than twice the N500 billion offer, although only N160.46 billion was allotted at 19.85 per cent.

The 152-day instrument generated the second-largest demand, attracting N3.29 trillion, or 6.59 times the offer, with the CBN allotting N1.77 trillion at 19.32 per cent.

Together, the 132-day and 152-day instruments accounted for N6.77 trillion of subscriptions and N3.95 trillion of allotments, representing about 84 per cent of the combined activity across the four auctions.

An unusual feature of the latest sales was the inverse relationship between tenor and yield. The longest-dated 152-day paper cleared at 19.32 per cent, below the 19.85 per cent and 19.90 per cent offered on the shorter 96-day and 97-day instruments.

The pattern suggests investors were willing to accept slightly lower annualised returns in exchange for locking funds away for longer, reflecting strong demand for certainty in the current high-rate environment.

The OMO mop-up, however, occurred alongside a substantial injection of liquidity from maturing government securities.

Primary-market repayments totalled N4.30 trillion over the two days, comprising N2.32 trillion on August 26 and N1.98 trillion on August 27.

After accounting for N762.89 billion in primary-market sales on August 27, the net liquidity injection from the primary market stood at about N3.54 trillion.

The CBN’s N4.72 trillion OMO sterilisation therefore more than offset that injection, producing an estimated net liquidity withdrawal of N1.19 trillion over the two days.

Despite the aggressive mop-up, the banking system remained liquid.

Opening balances for banks and discount houses stood at N169.55 billion on August 26, rose to N223.89 billion on August 27 and settled at N194.76 billion on August 28.

More tellingly, banks still had N3.42 trillion parked in the CBN’s Standing Deposit Facility as of August 28, indicating that substantial excess liquidity remained after the latest OMO operations.

The latest action adds to an increasingly active sterilisation programme. The CBN had already mopped up N7.18 trillion through OMO auctions in July, as it intensified efforts to manage system liquidity.

The widening investor base is also supporting demand, with OMO bills now accessible to individuals and other eligible investors through banks rather than being confined exclusively to traditional Money Market Dealers.

The CBN’s readiness to allot substantially above advertised volumes also suggests it is increasingly using OMO as an on-demand liquidity-management instrument.

According to Cordros Securities, about N2.25 trillion in OMO maturities remains in the pipeline, which could provide further liquidity to the system next week.

At the same time, the CBN is scheduled to conduct a N700 billion Treasury Bills auction, creating another potential drain on liquidity as the apex bank maintains its tighter money-market stance.

For fixed-income investors, the latest auctions reinforce the attractiveness of short- to medium-term naira instruments, with yields approaching 20 per cent.

For the CBN, however, the numbers tell another story: even after draining N4.72 trillion in 48 hours, N3.42 trillion remained parked at its deposit facility, showing that excess liquidity in the financial system is still substantial.