Banking System Liquidity Jumps 17.16% to N5.53trn as CBN Mops Up Excess Cash
By Aboki Forex —
Nigeria's average banking system liquidity rose 17.16 per cent to N5.53 trillion in May 2026, up from N4.72 trillion in April, according to the Central Bank of Nigeria. The increase works out to about N810 billion. It came from government-related payments and maturing securities, not from a sudden rush of individual deposits.
The CBN's Monthly Economic Report for May 2026 said the build-up reflected more funds sitting inside the financial system rather than ordinary Nigerians moving cash into their accounts.
What Drove the Inflows
Three main items pushed liquidity higher. They are maturing CBN bills, bond coupon payments and Federation Account Allocation Committee (FAAC) disbursements.
Cash Reserve Ratio maintenance and foreign exchange transactions also influenced liquidity conditions and helped shape movements in short-term interest rates during the month.
CBN Moves to Withdraw the Cash
With the system flush with money, the apex bank stepped up its Open Market Operations to pull some of it back. The CBN offered N3.6 trillion worth of CBN bills, but subscriptions hit N14.4 trillion.
The bank eventually allotted N12.54 trillion, with stop rates ranging from 19.97 per cent to 21.90 per cent.
"The higher-than-expected subscription reflected liquidity surfeit and attractive returns," the CBN said. It added that the operations produced a net withdrawal from the banking system.
Strong Demand for T-Bills and Bonds
Investor appetite showed up just as strongly in the Federal Government debt market. Subscriptions for Nigerian Treasury Bills reached N4.4 trillion, more than three times the N1.35 trillion on offer. The 364-day Treasury bill attracted the largest share of demand.
Longer-dated paper also drew heavy interest. Government offered N600 billion in 10-year and 20-year FGN bonds and received N800 billion in subscriptions. Stop rates settled between 17.00 per cent and 17.04 per cent.
The CBN said the oversubscription reflected attractive returns on government securities and sustained investor interest in the domestic debt market.
What It Means for Borrowers and Yields
High stop rates on CBN bills and government paper keep fixed-income yields elevated. That supports returns on naira assets, but it also raises the bar for private borrowers. When banks can earn close to 20 per cent parking idle cash in government securities, the incentive to lend to businesses weakens.
The liquidity picture is also playing out against a shrinking branch network. Deposit Money Banks closed a net 476 branches and cash centres between 2022 and 2025, with banking locations falling from 5,410 to 4,934, an 8.8 per cent contraction, according to the CBN's 2025 Statistical Bulletin for the Financial Sector.