Investor demand surges as apex bank intensifies fight against inflation and excess cash in banking system…..
The Central Bank of Nigeria (CBN) carried out one of its most aggressive liquidity tightening operations in recent history after mopping up a massive N3.692 trillion through Open Market Operations (OMO) auctions in a single day.
The move, executed on May 21, 2026, signals a major escalation in the apex bank’s efforts to drain excess liquidity from the financial system as authorities battle inflationary pressure and seek to stabilise the naira.
According to auction results released by the CBN and analysed by market observers, investor demand for the short-term debt instruments far exceeded expectations, with subscriptions climbing to more than six times the amount initially offered by the apex bank.
The CBN had offered a combined N600 billion across two OMO instruments, a 33-day bill and a 138-day bill but total subscriptions skyrocketed to N3.692 trillion.
The stronger demand highlights the huge volume of idle liquidity currently circulating within Nigeria’s banking system and investor appetite for high-yield government-backed securities.
The shorter 33-day instrument attracted N1.525 trillion in subscriptions against an offer of N300 billion, representing an oversubscription of more than five times the amount available.
The apex bank accepted all bids submitted for the instrument at a marginal rate of 21.57%.
Demand was even stronger for the 138-day bill, which recorded N2.168 trillion in subscriptions against the same N300 billion offer, translating to a staggering 7.2 times oversubscription.
All bids for the longer-tenor instrument were also accepted at a marginal rate of 19.97%.
Financial analysts noted that the CBN’s decision to accept every subscription marked a sharp shift from its earlier approach during the May 12 auction, when it accepted only N116 billion out of N872 billion in total subscriptions.
The latest operation suggests the apex bank is now aggressively targeting excess liquidity within the banking sector in a bid to slow inflation and reduce pressure on the foreign exchange market.
The impact of the liquidity mop-up was immediately visible across the banking system.
Data from the Standing Deposit Facility (SDF) where banks park excess funds overnight with the CBN showed balances dropped sharply from N6.103 trillion on May 20 to N2.703 trillion by May 22.
Opening balances within the banking system also declined significantly during the same period, indicating that large volumes of cash had been locked into OMO instruments.
Market activity around Treasury Bills and Federal Government bonds also contributed to the flood of liquidity in the system.
On May 21 alone, primary market sales involving Treasury Bills and FGN Bonds reached N829.33 billion, while repayments from maturing instruments injected hundreds of billions of naira back into the market.
Analysts believe these repayments played a major role in boosting investor participation in the OMO auction, forcing the CBN to intensify its liquidity absorption efforts.
Further data revealed that the apex bank had repaid about N4.78 trillion in previous OMO maturities earlier in May, including a massive N2.247 trillion repayment recorded on May 19.
The scale of the May 21 operation now stands in sharp contrast to the CBN’s cautious stance just days earlier.
At the May 12 auction, the bank accepted only a fraction of investor bids despite strong demand. But by May 21, the strategy had completely changed, with the apex bank absorbing nearly N3.7 trillion in one session roughly 32 times higher than the amount accepted nine days earlier.
The aggressive liquidity tightening comes amid concerns over inflation, exchange rate stability, and rising government borrowing requirements.
Nigeria’s 2026 budget carries a deficit of over N20 trillion, with a large portion expected to be financed through domestic borrowing, a situation that could further increase interest rates and tighten credit conditions for businesses.
Under Governor Olayemi Cardoso, the CBN has increasingly relied on OMO auctions as a key monetary policy tool to control excess liquidity and stabilise financial markets.
So far in 2026, cumulative OMO sales are estimated to have crossed N30 trillion, underlining the scale of the apex bank’s intervention in the financial system.
