Banks face N13.79trn liquidity inflows in November as CBN slows

Nigeria’s banking system is projected to receive N13.79 trillion in liquidity inflows in November 2026, as maturing Open Market Operations (OMO) bills, government allocations and Treasury Bills repayments combine with a slowdown in the Central Bank of Nigeria’s (CBN) liquidity absorption activities.

The projection by the Financial Markets Dealers Association (FMDA), contained in its October 2026 market report, represents a 2.16 per cent increase from the N13.50 trillion recorded in October, pointing to potentially stronger liquidity conditions in the financial system.

The anticipated inflows come against the backdrop of a 56.75 per cent increase in banking system liquidity to N7.373 trillion in October, from N4.703 trillion in September, following a moderation in the CBN’s OMO mop-up operations.

OMO maturities are expected to account for the largest portion of November’s projected inflows, with N8.927 trillion scheduled for repayment, representing 64.75 per cent of the total.

Federation Account Allocation Committee (FAAC) disbursements are projected at N2.50 trillion, accounting for 18.13 per cent, while Treasury Bills maturities are estimated at N1.919 trillion, representing 13.92 per cent.

Together, the three sources are expected to contribute approximately 96.8 per cent of total projected inflows, underscoring the extent to which liquidity conditions will depend on government disbursements and the maturity profile of monetary policy instruments.

Other expected inflows include N323.154 billion in Federal Government bond coupon payments, N68.032 billion in corporate bond coupons and N50.016 billion from commercial paper maturities.

The association also identified a $105.94 million Eurobond coupon payment due in November, although this is excluded from its naira-denominated liquidity projection.

A breakdown of the figures shows that Treasury Bills maturities will record the strongest monthly increase, rising by 46.49 per cent, or approximately N609 billion, from N1.310 trillion in October.

Corporate bond coupon payments are also projected to increase by 213.28 per cent, although their contribution to overall liquidity remains relatively small.

In contrast, OMO maturities are expected to decline by 1.37 per cent, while Federal Government bond coupon payments are projected to fall by 49.08 per cent.

The November outlook reflects a significant shift in the CBN’s liquidity management operations, particularly its approach to OMO auctions.

According to the FMDA, the apex bank allotted N6.182 trillion in fresh OMO securities against N9.051 trillion in maturities during October, leaving a net repayment difference of approximately N2.87 trillion before other liquidity movements.

This contrasted with September, when the CBN sold approximately N17.51 trillion in OMO securities against maturities of N10.89 trillion, resulting in a net liquidity withdrawal of about N6.62 trillion.

The moderation became more evident towards the end of October, when the CBN reduced its allotments at its final OMO auction. Treasury Bills auctions also recorded substantial unfilled subscriptions, reflecting the regulator’s selective acceptance of investor bids.

The shift in monetary operations has coincided with rising banking system balances, with the FMDA previously reporting a 69.39 per cent increase in liquidity to N6.283 trillion in the week ended October 16.

For banks and fixed-income investors, the projected November inflows could sustain demand for short-term securities, particularly if fresh OMO and Treasury Bills issuances remain below maturing obligations.

However, the extent to which the anticipated funds translate into additional liquidity will depend on the CBN’s subsequent auction decisions, government cash movements and the proportion of maturing investments reinvested in new securities.

Despite the increase in banking system liquidity, interbank funding rates remained relatively stable during October. The Nigeria Overnight Financing Rate (NOFR) closed unchanged at 20.00 per cent, while the overnight rate declined by five basis points to 20.38 per cent.

The Monetary Policy Rate (MPR) remained at 23.00 per cent following the CBN’s September 2026 decision to reduce it by 350 basis points.

The November Monetary Policy Committee meeting is expected to provide further direction for liquidity conditions and the cost of funds in the banking system.

The FMDA expects relatively comfortable liquidity conditions if the CBN sustains the selective auction allotments recorded towards the end of October. It, however, advised banks to maintain adequate liquidity buffers, given the apex bank’s continued reliance on OMO auctions to manage excess funds.

The association cautioned that the projected N13.79 trillion should not be interpreted as an equivalent increase in available banking system liquidity, as fresh securities issuance could absorb a substantial portion of the funds.

A return to aggressive OMO mop-up operations could therefore reverse some of the anticipated liquidity expansion, while continued selective allotments could sustain excess cash balances and intensify downward pressure on short-term money market yields.