CBN faces N2.41tn OMO test as liquidity hits N4.04tn

The Central Bank of Nigeria faces a critical test of its liquidity management, with a N2.41tn Open Market Operations bill maturity looming and banking system liquidity already surging to N4.04tn.

The surplus funds, up 8.99 percent from N3.71tn, have eased short-term borrowing costs. The overnight rate fell 13 basis points to 20.72 percent, while the open repo rate dropped 40 basis points to 20 percent.

But all eyes are on Tuesday’s OMO maturity, which could inject more cash into the system unless the CBN moves to withdraw it. OMO instruments allow the apex bank to sell short-term securities to banks, absorbing excess cash.

Analysts expect a fresh OMO auction to contain the surplus and manage its impact on rates. Herwood Securities said the direction of money market rates would depend on the auction’s outcome.

Despite the liquidity boost, rates remain around 20 percent—a sign that short-term funding costs are still elevated.

For the CBN, the challenge is clear: mop up enough cash to keep rates stable without destabilising the market. The next OMO auction will show how well it walks that line.