The Central Bank of Nigeria (CBN) stepped up efforts to remove excess cash from the financial system last week, withdrawing roughly 5.48 trillion naira through its Open Market Operations (OMO) over a two-day span.
The move was aimed at absorbing surplus liquidity that officials feared could otherwise stoke inflation, put pressure on the naira, and add to volatility in financial markets.
How the mop-up unfolded
System liquidity opened the week at 5.46 trillion naira on Monday, boosted by an inflow of 139.15 billion naira into the banking system. The central bank intensified its intervention on Thursday, allotting a further 2.69 trillion naira in OMO bills. That same day, banks also settled 763 billion naira in Nigerian Treasury Bills, adding further pressure on available funds.
Combined, the OMO withdrawals and the treasury bill settlement drained an estimated 6.24 trillion naira from the system, leaving liquidity at 3.61 trillion naira by the end of the week — a sharp decline from levels recorded earlier.
Market impact limited
Despite the scale of the withdrawal, short-term borrowing costs held relatively steady. The overnight lending rate eased by seven basis points to 22.21%, while the funding rate was unchanged at 22%. The overnight Nigerian Interbank Offered Rate (NIBOR) slipped marginally to 22.229%, suggesting funding conditions in the money market remained broadly stable even after the aggressive liquidity drain.
Analysts noted the withdrawn funds are not permanently removed from the economy, as some could return once the OMO securities mature, unless the central bank opts to roll them over or conduct additional liquidity operations.
