Nigeria's banking system recorded a sharp increase in cash liquidity in May 2026, with the average net liquidity rising to N5.53 trillion, a 17.16% increase from the N4.72 trillion recorded in April 2026, according to the Central Bank of Nigeria's (CBN) Monthly Economic Report for May 2026.
Drivers of the Liquidity Surge
The surge in banking system liquidity was largely driven by inflows from matured CBN bills, bond coupon payments, and allocations to states and other tiers of government through the Federation Account Allocation Committee (FAAC), the apex bank said.
The liquidity position was also influenced by Cash Reserve Ratio (CRR) maintenance and foreign exchange-related activities, which helped keep short-term interest rates relatively stable during the period.
CBN's Open Market Operations
With the banking system awash with liquidity, the CBN intensified its Open Market Operations (OMO) to withdraw excess funds. The apex bank offered N3.6 trillion worth of CBN bills to investors during the month, but demand far exceeded the amount on offer, with subscriptions reaching N14.4 trillion.
The CBN eventually allotted N12.54 trillion, with stop rates ranging from 19.97% to 21.90%. The regulator said the unusually high level of subscriptions reflected the large amount of liquidity in the financial system, as well as investors' attraction to the returns available on the securities.
CBN noted: “The higher-than-expected subscription reflected liquidity surfeit and attractive returns. Overall, the liquidity operations of the Bank resulted in net withdrawal from the banking system.”
Strong Demand for Government Securities
Meanwhile, the Federal Government continued to attract strong investor demand as it pushed ahead with its domestic borrowing programme through Nigerian Treasury Bills (NTBs) and Federal Government of Nigeria (FGN) bonds.
The report showed that subscriptions for NTBs jumped to N4.4 trillion in May, significantly higher than the N1.35 trillion initially offered. The 364-day Treasury Bill remained the most sought-after instrument among investors during the period.
Long-term government securities also recorded strong demand, with the Federal Government's 10-year and 20-year bonds attracting N800 billion in subscriptions, compared with the N600 billion offered. Stop rates on the bonds remained within a narrow range of 17.00% to 17.04%.
The CBN attributed the strong demand for government securities to the attractive returns available to investors and what it described as sustained confidence in the domestic debt market.
