CBN mops up N1.06trn as cash surge fuels T-Bill demand

The Central Bank of Nigeria (CBN) mopped up excess liquidity from the banking system on Wednesday, raising N1.06 trillion at its Treasury bills auction after the repayment of N2.21 trillion in maturing Open Market Operation (OMO) bills injected fresh cash into the financial system.

 

The auction, conducted on behalf of the federal government, saw the CBN allot N1.06 trillion across the three standard tenors, representing a 52 percent over-allotment above the initial offer of N700 billion, as investors flocked to lock in attractive yields on one-year government securities.

The liquidity injection from the OMO maturity significantly improved market conditions ahead of the auction. Banking system liquidity rose after the repayment of N2.21 trillion in OMO bills on July 7, 2026, with no immediate OMO auction conducted to sterilise the excess cash. Consequently, placements at the Standing Deposit Facility (SDF) jumped 87 percent to N4.60 trillion from N2.46 trillion, while total system liquidity edged up to N4.87 trillion from N4.85 trillion the previous day.

 

The one-year Treasury bill dominated investor interest, attracting subscriptions worth N1.86 trillion against N500 billion offered, translating to a bid-to-cover ratio of 3.71 times, up from 2.08 times at the previous auction. Responding to the strong demand, the CBN allotted N935.32 billion in the 364-day bill, well above the amount initially offered.

 

Demand for the shorter-tenor instruments remained relatively subdued. The 91-day bill recorded subscriptions of N146.54 billion against N100 billion offered, implying a bid-to-cover ratio of 1.47 times, while the 182-day bill was undersubscribed with a bid-to-cover ratio of just 0.30 times.

 

Pricing remained firm across the curve. The stop rate on the 364-day Treasury bill rose to 17.70 percent from 17.34 percent at the previous auction, while the 91-day stop rate edged up marginally to 16.30 percent from 16.28 percent. The 182-day stop rate remained unchanged at 16.50 percent, suggesting investors continued to demand higher returns before committing funds for longer maturities.

 

Ahead of the auction, Treasury bill yields in the secondary market remained elevated despite a slight moderation in average yields. The one-month and 12-month benchmark yields eased to 16.07 percent and 19.48 percent, respectively, while the three-month, six-month and nine-month benchmark yields rose to 17.58 percent, 18.90 percent and 20.04 percent, reflecting sustained demand for high-yielding short-term instruments.

 

Analysts at the Financial Markets Dealers Association (FMDA) said the strong demand for the 364-day Treasury bill reinforced investors’ preference for locking in elevated yields at the longer end of the curve. The association noted that the repayment of N2.21 trillion in OMO bills, combined with the absence of immediate liquidity sterilisation, supported stronger participation at the auction.

 

According to the FMDA, despite the strong demand, the increase in the one-year stop rate indicates that investors continue to seek higher compensation before committing funds for longer tenors. It added that the net issuance of about N550.21 billion means the auction remained liquidity-absorbing overall, although the immediate impact was softened by the sizeable OMO repayment.

 

The auction marks the start of the CBN’s third-quarter Treasury bill issuance programme, under which the apex bank plans to raise N5.8 trillion between July and September, compared with N2.64 trillion in maturing Treasury bills during the period. The programme, which points to a net issuance of about N3.16 trillion, underscores the CBN’s continued use of Treasury bill sales to manage liquidity while supporting the federal government’s domestic borrowing programme.