Nigeria's banking system recorded a significant surge in excess cash in May 2026, with average net liquidity rising to N5.53 trillion, according to the Central Bank of Nigeria (CBN). This represents a 17.16% increase, or about N810 billion, from the N4.72 trillion recorded in April. The development came as the financial system received substantial inflows from government-related payments and maturing securities.
Drivers of the Liquidity Surge
According to the CBN's Monthly Economic Report for May 2026, the increase was driven mainly by 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.
The figures suggest that banks had significantly more funds available within the financial system, rather than indicating that individual Nigerians suddenly increased their bank deposits.
CBN Intensifies Open Market Operations
Faced with the liquidity surge, the CBN intensified its Open Market Operations (OMO) to withdraw some of the excess funds from the banking system. The apex bank offered N3.6 trillion worth of CBN bills, but demand dramatically exceeded the amount available. Subscriptions reached a staggering N14.4 trillion, highlighting investors' strong appetite for high-yielding fixed-income securities. The CBN eventually allotted N12.54 trillion, with stop rates ranging from 19.97% to 21.90%.
“The higher-than-expected subscription reflected liquidity surfeit and attractive returns,” the CBN said, adding that its liquidity operations ultimately resulted in a net withdrawal from the banking system.
Investors Rush Treasury Bills and Bonds
Investor demand was equally strong in the Federal Government debt market. Subscriptions for Nigerian Treasury Bills reached N4.4 trillion, more than three times the N1.35 trillion initially offered. The 364-day Treasury bill attracted the largest share of demand. Longer-term government securities also recorded strong interest. The government offered N600 billion in 10-year and 20-year FGN bonds and received subscriptions worth N800 billion. Stop rates settled between 17.00% and 17.04%.
The CBN said the oversubscription reflected attractive returns on government securities and sustained investor interest in the domestic debt market.
Broader Context: Bank Branch Closures
Legit.ng earlier reported that Nigeria's banking industry is rapidly reducing its physical footprint as Deposit Money Banks closed a net 476 branches and cash centres between 2022 and 2025. Data from the Central Bank of Nigeria's 2025 Statistical Bulletin for the Financial Sector showed that banking locations nationwide fell from 5,410 in 2022 to 4,934 in 2025, an 8.8% contraction over three years.
