CBN Releases N3.8trn Into Banks, Excess Liquidity Hits N4.89trn

By Johnson Emmanuel  

The Central Bank of Nigeria (CBN) released N3.81 trillion into the banking system within two days through repayments of Open Market Operations (OMO) obligations and primary market instruments, creating a sharp increase in excess liquidity parked by banks with the apex bank.

DEVELOPMENT:

CBN financial market data showed that N3.056 trillion in OMO obligations was repaid on September 15, followed by N748.64 billion in primary market repayments on September 16.

The liquidity release coincided with a sharp rise in banks’ placements at the Standing Deposit Facility (SDF), which increased to N4.891 trillion on September 16 from N2.118 trillion a day earlier.

Banks opened September 16 with balances of N251.25 billion, compared with N364.78 billion the previous day. Despite the lower opening balances, the fresh N748.64 billion primary market repayment was largely parked back with the CBN.

DATA:

The N3.056 trillion OMO repayment alone exceeded the N2.118 trillion banks placed at the SDF on September 15, indicating a substantial release of liquidity.

Across September 15 and 16, banks cumulatively placed N7.01 trillion at the SDF, compared with N3.81 trillion released through OMO and primary market repayments during the same period.

The liquidity inflow was broadly consistent with the Financial Markets Dealers Association (FMDA) projection of N3.56 trillion for the week, an 18.2 percent increase from N3.02 trillion the previous week.

OMO maturities were projected at N3.06 trillion, representing about 86 percent of expected inflows. The actual N3.056 trillion repayment on September 15 almost exactly matched the projection.

Treasury Bills maturities were projected at N449.76 billion, up from N71.37 billion the previous week. Other expected inflows included N39.65 billion in FGN bond coupons, N5.87 billion in corporate bond coupons and N8.47 billion from commercial paper maturities.

SIGNIFICANCE:

For investors, the episode shows the scale and speed at which liquidity can move through Nigeria’s financial system when large government and CBN instruments mature.

However, the N4.89 trillion SDF placement also shows that released liquidity did not immediately translate into lending or risk-taking by banks. A substantial portion was returned to the CBN rather than deployed into the wider economy.

NEXT MOVE:

The key indicators are SDF placements, bank balances, OMO auctions, Treasury Bill maturities and primary-market settlements.

Investors should also watch whether the liquidity release affects money-market rates, government securities yields, credit conditions and foreign-exchange demand.

OUR LENS:

The immediate story is a N3.81 trillion liquidity injection. The deeper story is the N7.01 trillion that banks placed at the SDF over two days.

That divergence suggests that liquidity availability and liquidity deployment remain separate issues. The banking system can receive substantial funds without those funds automatically becoming private-sector credit or productive investment.

For the CBN, the challenge is therefore not simply managing how much liquidity enters the system, but how that liquidity ultimately interacts with credit, inflation, financial-market pricing and economic activity.

Johnson Emmanuel is a journalist, covering business, investment, monetary & fiscal policies, economic affairs and issues of significance to Nigeria’s corporate and public sectors.