Banks Stake N14.4trn on CBN Bills as SMEs Face Funding Squeeze
Nigerian banks and institutional investors committed N14.4 trillion to the Central Bank of Nigeria's liquidity-absorbing auctions in May, even though the regulator only put N3.6 trillion worth of instruments on the table.
According to the CBN's Economic Report for May, the Open Market Operations auctions drew subscriptions more than four times the amount offered. The apex bank ultimately allotted N12.54 trillion.
The scale of the May activity marks a sharp jump from April, when N10.6 trillion was staked on N3 trillion of OMO bills, with N9.51 trillion eventually allotted.
The central bank attributed the surge in demand to excess liquidity in the system and the attractive yields on offer. Stop rates on the instruments ranged between 19.97 per cent and 21.90 per cent in May, compared with a range of 19.85 per cent to 21.90 per cent in the previous period.
OMO auctions are a routine tool used by the CBN to soak up excess cash in the financial system, and the May figures suggest that lenders had far more funds available than they chose to deploy elsewhere.
The report also showed that activity at the CBN's standing facilities window reflected the prevailing liquidity conditions, with banks' deposits at the apex bank dwarfing their borrowings.
Use of the Standing Lending Facility, which provides overnight liquidity support to deposit money banks, fell to N0.02 trillion in May from N0.05 trillion in April. The daily average also eased to N0.02 trillion, pointing to weak demand for short-term funding from the central bank.
At the Standing Deposit Facility, where banks park surplus cash, placements stood at N86.30 trillion, down from N91.55 trillion in April. The decline came even as the average daily placement edged up to N4.79 trillion from N4.56 trillion.
The drop in SDF placements despite higher liquidity was linked to the absorption of funds through open market operations, with total OMO allotments rising by 31.86 per cent compared with April 2026.
Average liquidity in the banking system climbed in May, supported by maturing CBN bills, bond coupon payments and fiscal injections. Net liquidity averaged N5.53 trillion, a 17.16 per cent increase from N4.72 trillion in the preceding period.
The rise was driven mainly by inflows from maturing central bank bills, bond coupons and disbursements by the Federation Account Allocation Committee. Liquidity conditions were further influenced by cash reserve ratio maintenance and foreign exchange-related activities, which helped keep short-term interest rates stable.
The data underscores a persistent mismatch in Nigeria's financial system: while huge sums circulate through the central bank's liquidity management channels, businesses continue to report difficulty accessing affordable credit.
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