The Central Bank of Nigeria (CBN) is set to roll out fresh liquidity control measures, known as Open Market Operations (OMO), to absorb 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 come in today, while Nigerian Treasury Bill (NTB) maturities of N324.41 billion will enter the market on Thursday. Banking system liquidity balance opened at N275.9 billion on September 1, 2025, reflecting a 10.4 percent increase compared to N249.8 billion on August 25, 2025, according to CBN data.
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OMO is a monetary policy tool deployed by the CBN to regulate money supply in the banking system. When the apex bank issues OMO bills, it borrows money from banks and investors in exchange for short-term securities, thereby reducing excess liquidity and easing inflationary pressures.
Coronation Merchant Bank noted in its latest report that the NTB auction of N480 billion scheduled for Wednesday should further support liquidity mop-up. In the FGN bond market, yields are expected to moderate, driven by strong demand for newly issued on-the-run papers.
Last week, system liquidity improved to N1.40 trillion, reversing from a deficit of N609.43 billion in the prior week. The recovery was supported by Federation Account Allocation Committee (FAAC) disbursements and OMO maturities of N758.0 billion, which outweighed CBN’s liquidity absorption of N1.19 trillion through OMO sales.
As a result, interbank rates eased, with the Open Repo Rate (OPR) and Overnight (OVN) declining by 240bps and 220bps to 26.50 percent and 26.95 percent, respectively.
In the T-bills secondary market, trading was largely bearish, as the average yield across the curve rose 23bps w/w to 22.18 percent per annum. The uptick was driven by NTBs, where average yields expanded by 50bps w/w to 18.88 percent per annum. In contrast, OMO bills recorded a marginal decline, with average yields easing by 3 bps to 25.49 percent per annum.
The apex bank’s liquidity mop-up through OMO sales rose by 79.19 percent in one year, helping to curb inflationary pressure while supporting naira stability.
The CBN withdrew N13.35 trillion from the financial system year-to-date as of August 22, 2025, compared to N7.45 trillion in the same period of 2024. This reflects a significant tightening push under Olayemi Cardoso, governor of the CBN, especially when compared to 2022, before his appointment, when OMO sales were only N710 billion in the first eight months.
OMO remains a key monetary tool for managing liquidity in the financial system. By selling securities such as T-bills to banks and investors, the CBN reduces excess cash in circulation, stabilising inflation and the broader economy. Nigeria’s headline inflation declined for the fourth straight month, easing from 22.22 percent in June to 21.88 percent in July 2025. Though the moderation of 0.34 percent may appear modest, it highlights growing traction in the apex bank’s disinflation strategy.
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Ayodele Akinwunmi, chief economist at United Capital Plc, said the CBN has deployed OMO as a central instrument for liquidity management and price stability. He noted that OMO has also been strategically used to attract Foreign Portfolio Investments (FPIs), a move that has strengthened naira stability, reduced excess money supply, and supported disinflation. “Collectively, these outcomes have bolstered investor confidence and reinforced Nigeria’s appeal as an investment destination,” Akinwunmi said.
The apex bank’s aggressive OMO issuances represent one of the most forceful liquidity-tightening drives in recent years. According to FBNQuest, total OMO sales jumped to N13.5 trillion in 2024, up from N723 billion in 2023. Notably, during a single auction on November 11, 2024, the CBN sold more than N1.4 trillion in 365-day OMO bills, nearly double the total for the entire preceding year.
One of the major drivers for the scale-up in OMO issuance has been to attract foreign portfolio inflows and strengthen FX liquidity. Elevated OMO yields, which peaked at 24.4 percent in September 2024, created favourable conditions for carry trades, particularly against U.S. treasury yields. Analysts at Coronation Merchant Bank observed: “We expect upward pressure on yields in the near term as liquidity conditions tighten on the back of OMO issuances.”
