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The Central Bank of Nigeria (CBN) withdrew N4.72 trillion from the banking system through four Open Market Operations (OMO) auctions conducted between August 26 and 27, 2026, as investors continued to show strong appetite for short-term instruments offering returns close to 20%.
The latest intervention underscores the apex bank’s continued effort to manage excess liquidity in the financial system, even as substantial funds from maturing government securities flowed back into the banking sector during the same period.
Data from the CBN showed that the four auctions covered 96-, 97-, 132- and 152-day instruments, with a combined face value of N2 trillion initially offered.
However, investor demand was significantly higher, with total subscriptions reaching N8.62 trillion, more than four times the amount initially put on offer.
Longer Tenors Attract Bulk of Demand
The strongest demand was recorded on the longer-dated OMO instruments.
At the August 26 auction, investors submitted N783.49 billion for the 97-day bill against an N500 billion offer. The CBN allotted N613 billion, with the instrument clearing at 19.90%.
The same day, demand for the 132-day instrument reached N3.478 trillion, almost seven times the N500 billion offered. The CBN eventually allotted N2.183 trillion, while the final rate stood at 19.65%.
On August 27, the 96-day OMO attracted N1.067 trillion in subscriptions against N500 billion on offer. The CBN allotted N160.46 billion, with the instrument clearing at 19.85%.
The 152-day paper recorded the largest single allotment, with N1.768 trillion sold from subscriptions of N3.294 trillion. Its clearing rate was 19.32%, the lowest among the four instruments.
Investors Accept Lower Rates for Longer Lock-In
The auction results revealed an unusual but increasingly familiar pattern in Nigeria’s fixed-income market.
The longest-dated instrument, the 152-day OMO, offered the lowest clearing yield at 19.32%, while the shorter 96- and 97-day securities cleared at 19.85% and 19.90%, respectively.
Despite the lower annualised return, investors placed substantial funds in the longer instruments.
The pattern suggests that institutional investors are increasingly willing to lock in funds for longer periods in exchange for greater certainty over returns, rather than simply pursuing the highest available rate.
The 132-day and 152-day instruments together attracted N6.77 trillion in subscriptions and accounted for approximately N3.95 trillion of the total allotment.
N4.3trn Returns Through Maturing Securities
The scale of the CBN’s OMO sterilisation becomes clearer when placed against liquidity flowing into the banking system during the same two-day period.
Primary-market repayments amounted to N4.302 trillion, comprising N2.321 trillion on August 26 and N1.981 trillion on August 27.
This meant a substantial portion of the funds withdrawn through OMO operations was effectively offset by repayments on maturing government securities.
Primary-market sales on August 27 also removed N762.89 billion, leaving a net primary-market liquidity injection of approximately N3.539 trillion over the two days.
Despite the competing flows, liquidity conditions remained relatively strong.
Opening balances held by banks and discount houses stood at N169.55 billion on August 26, increased to N223.89 billion the following day and settled at N194.76 billion on August 28.
Excess Liquidity Remains High
The size of funds sitting at the CBN’s Standing Deposit Facility further highlights the liquidity situation.
As of August 28, banks had N3.42 trillion parked at the facility, where financial institutions place excess cash with the apex bank.
The figure indicates that the aggressive OMO sales, while absorbing billions of naira from the system, have not completely eliminated excess liquidity.
Instead, the CBN appears to be using OMO transactions to recycle surplus funds and prevent excessive liquidity from creating additional pressure within the financial system.
OMO Becomes More Attractive to Investors
The near-20% yields are also increasing the appeal of CBN instruments among institutional investors seeking relatively high returns from short-term assets.
The strong subscription levels across the four auctions demonstrate the depth of demand for OMO bills, particularly at a time when investors are weighing returns across different asset classes.
The latest auctions also follow a broader pattern of strong demand for OMO securities in 2026, as the CBN has increasingly relied on the instruments to manage liquidity.
For the financial markets, the continued availability of OMO yields close to 20% means fixed-income assets remain an important competitor for investor funds.
That dynamic could influence how investors allocate capital between money-market instruments and riskier assets such as equities.
CBN Balances Liquidity Management With Market Demand
The latest operation highlights the delicate balance facing the apex bank.
On one side, the CBN needs to absorb excess liquidity to support monetary stability. On the other, large volumes of government-security maturities are returning funds to the financial system, creating fresh liquidity that can potentially be redeployed into OMO securities.
The August 26–27 auctions show that investors remain willing to provide substantial funds to the CBN even when the amount initially advertised is significantly lower than total demand.
With subscriptions reaching N8.62 trillion against N2 trillion offered and total allotments reaching N4.72 trillion, the latest operation demonstrates both the scale of available liquidity and the strength of institutional demand for high-yielding short-term naira assets.
The key question for the coming auctions will be whether the CBN continues accepting large volumes above its advertised offers and whether yields remain around the 20% threshold as monetary authorities continue their liquidity-management drive.
