CBN’s N16.9tn liquidity mop-up tightens banks’ cash as N12.4tn inflow looms

Nigeria’s banking system liquidity came under renewed pressure in June as the Central Bank of Nigeria (CBN) intensified its liquidity sterilisation operations, withdrawing an estimated N16.9 trillion through Treasury bill and Open Market Operations (OMO) auctions, according to the latest monthly report by the Financial Markets Dealers Association (FMDA).

The report showed that average system liquidity declined by 12.26 percent to N4.58 trillion in June, from N5.22 trillion in May 2026, reflecting the impact of the apex bank’s aggressive efforts to mop up excess liquidity from the financial system as it seeks to contain inflationary pressures and maintain monetary stability.

Despite the sizeable liquidity withdrawals, the report indicated that financial markets could witness another significant wave of liquidity in July. An estimated N12.39 trillion is expected to flow into the banking system during the month, representing an increase of about 8.7 percent from the N11.40 trillion estimated in June.

According to the FMDA, about 73 percent of the expected July inflows will come from maturing OMO bills. However, it noted that the ultimate liquidity impact will depend largely on the CBN’s sterilisation strategy and the extent to which the Central Bank decides to re-absorb the maturing funds.

“The net liquidity impact will depend on the CBN’s sterilisation strategy,” the report stated, suggesting that the monetary authority is likely to continue balancing liquidity conditions against its inflation-control objectives.

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The report noted that while elevated system liquidity is expected to continue supporting funding availability across the banking sector and moderate short-term funding pressures, the CBN may sustain its liquidity management operations despite the sizeable market inflows expected this month.

Against the backdrop of tighter liquidity conditions, domestic fixed-income yields continued to rise in June. Average Treasury bill yields climbed by 138 basis points to 18.86 percent, while average Federal Government of Nigeria bond yields increased by 107 basis points to 17.45 percent.

The report attributed the increase in yields to renewed concerns over government borrowing requirements, rising inflation expectations and stronger investor demand for higher returns.

FMDA advised investors to continue positioning portfolios to benefit from elevated fixed-income yields while actively managing duration risk. It also recommended that market participants maintain prudent liquidity buffers, warning that the CBN could continue sterilisation operations even as substantial liquidity returns to the financial system.

The association added that inflation, government borrowing requirements and developments in global monetary policy would remain the key factors shaping domestic yields, funding costs and overall market liquidity in the months ahead.

Hope Moses-Ashike

Hope Moses-Ashike is an Associate Editor, Banking and Finance, with more than a decade of experience reporting on Nigeria’s financial system and broader economy. She closely tracks market movements, monetary policy decisions, company disclosures, regulatory actions, economic indicators, and global developments, and interprets what they mean for businesses, investors, policymakers, and households. Her reporting helps readers understand complex issues such as inflation trends, foreign exchange market dynamics, interest rate decisions, bank performance, and investment risks. She also covers major international events and periodically travels to Washington, D.C., to report on the World Bank/IMF Spring and Annual Meetings. Her dedication to financial journalism has earned her multiple recognitions and invitations to high-level professional development programmes. She is an alumna of the International Visitors Leadership Programme (IVLP) in the United States and holds an Advanced Financial Journalism Certificate from the Press Association Training in London, UK. Her other notable achievements include completing the Lagos Business School CMC Programme, the Bloomberg Media Africa Initiative Programme, and a Master Class in Journalism at Rhodes University in South Africa.