The Central Bank of Nigeria (CBN) is set to roll out fresh liquidity control measures through Open Market Operations (OMO) to absorb an estimated N784 billion inflows expected to hit the banking system this week.
A breakdown of the inflows shows that OMO maturities of N459.60 billion will enter the system today, while Nigerian Treasury Bill (NTB) maturities of N324.41 billion are due on Thursday. Banking system liquidity opened at N275.9 billion on September 1, 2025, up 10.4% from N249.8 billion on August 25, according to CBN data.
OMO as a Monetary Tool
OMO is one of the apex bank’s key instruments for regulating money supply in the financial system. By issuing OMO bills, the CBN borrows from banks and investors in exchange for short-term securities, thereby reducing excess liquidity and helping to ease inflationary pressures.
A Bank noted that the N480 billion NTB auction scheduled for Wednesday should further support liquidity mop-up. In the FGN bond market, yields are expected to moderate on the back of strong demand for newly issued on-the-run securities.
Recent Liquidity Trends
Last week, banking system liquidity rebounded to N1.40 trillion, reversing from a deficit of N609.43 billion in the previous week. This was supported by FAAC disbursements and OMO maturities of N758 billion, which outweighed the CBN’s liquidity absorption of N1.19 trillion through OMO sales.
As a result, interbank rates eased:
Open Repo Rate (OPR): down 240bps to 26.50%
Overnight (OVN): down 220bps to 26.95%
In the T-bills secondary market, trading was largely bearish. Average yield across the curve rose 23bps w/w to 22.18%, driven by NTBs where average yields expanded 50bps w/w to 18.88%. OMO bills, however, recorded a marginal decline, with average yields easing 3bps to 25.49%.
Rising OMO Sales
The CBN’s liquidity mop-up via OMO sales has surged by 79.2% year-on-year, supporting naira stability and curbing inflationary pressures.
Between January and August 22, 2025, the apex bank withdrew N13.35 trillion from the financial system, compared to N7.45 trillion in the same period of 2024. This represents a significant tightening push under Governor Olayemi Cardoso, especially compared with 2022, when OMO sales in the first eight months stood at just N710 billion.
Nigeria’s headline inflation has eased for the fourth consecutive month—from 22.22% in June to 21.88% in July 2025—underscoring the traction of the CBN’s disinflation drive.
Expert Insights
An economist opines that the CBN has deployed OMO as a central tool for liquidity management and price stability. He added that OMO has been strategically used to attract Foreign Portfolio Investments (FPIs), which has helped strengthen Naira stability, reduce money supply, and bolster disinflation.
“Collectively, these outcomes have bolstered investor confidence and reinforced Nigeria’s appeal as an investment destination,” he stated.
Another analyst highlighted that total OMO sales reached N13.5 trillion in 2024, a massive jump from N723 billion in 2023. Notably, during a single auction on November 11, 2024, the CBN
sold over N1.4 trillion in 365-day OMO bills, nearly double the entire sales volume of the previous year.
Outlook
One of the key drivers of the aggressive OMO issuances is the need to attract foreign portfolio inflows and strengthen FX liquidity. Elevated OMO yields, which peaked at 24.4% in September 2024, created favorable conditions for carry trades relative to U.S. Treasury yields.
According to a Bank, upward pressure on yields is expected in the near term as liquidity conditions tighten further with new OMO issuances.
Related Posts