Nigeria's overnight funding market recorded its highest monthly turnover since inception, hitting N97.45 trillion in June 2026, according to data from the FMDQ Securities Exchange. This represents a significant increase from previous months, driven by persistent liquidity tightness in the banking system and elevated interest rates.
Market Performance and Drivers
The June turnover surpassed the previous record of N85.3 trillion set in May 2026, marking a 14.3% month-on-month increase. The average daily turnover in June stood at N4.87 trillion, compared to N4.27 trillion in May. Market analysts attribute the surge to the Central Bank of Nigeria's (CBN) tight monetary policy stance, which has kept interbank rates elevated and encouraged banks to borrow overnight to meet reserve requirements.
According to a report by FMDQ, the overnight lending rate averaged 32.5% in June, up from 30.1% in May. This has made the overnight market attractive for banks with surplus funds, while those with shortfalls have had to borrow at high costs.
Impact on Banking System
The high turnover reflects increased reliance on overnight funding among Nigerian banks. A senior economist at Lagos-based consultancy told Nairametrics, 'The N97.45 trillion figure underscores the liquidity crunch in the banking system. Banks are increasingly dependent on the overnight window to manage their daily cash positions, as deposit growth lags behind credit expansion.'
The CBN has maintained a hawkish stance since 2024, raising the Monetary Policy Rate (MPR) to 27.5% to combat inflation. This has reduced money market liquidity, forcing banks to seek short-term funding at higher rates.
Comparison with Previous Months
June's turnover is more than double the N48.2 trillion recorded in January 2026. The market has grown steadily from N32.1 trillion in January 2025, driven by the CBN's liquidity management operations, including Open Market Operations (OMOs) and Special Bills.
Data from FMDQ shows that the overnight funding market has become a key barometer of banking system liquidity. The record high in June suggests that liquidity conditions remain tight, despite efforts by the CBN to inject funds through repurchase agreements.
Outlook
Market participants expect the overnight market to remain active in the coming months, as the CBN shows no signs of easing monetary policy. Inflation remains elevated at 33.2% as of May 2026, limiting the scope for rate cuts. The high cost of funds continues to pressure bank margins, but also presents opportunities for institutions with surplus liquidity to earn attractive returns.
