Nigeria's banking system eyes N13.79trn November liquidity boost as CBN eases mop-up
Nigeria's financial system is projected to receive N13.79 trillion in liquidity inflows this November, a 2.16% jump from October's N13.50 trillion, according to the Financial Markets Dealers Association (FMDA). The surge comes as the Central Bank of Nigeria (CBN) significantly slows its liquidity mop-up operations—banking-system liquidity already surged 56.75% to N7.373 trillion in October.
Open Market Operations (OMO) maturities dominate November's inflows at N8.927 trillion (64.75% of total), followed by FAAC allocations at N2.50 trillion and Treasury Bills maturities at N1.919 trillion. Together, these three sources account for nearly 97% of expected inflows. Notably, Treasury Bills maturities jump 46.5% month-on-month while OMO maturities dip slightly. The CBN's October shift is stark: it allotted just N6.182 trillion in fresh OMO securities against N9.051 trillion maturities—a net N2.87 trillion injection versus September's N6.62 trillion net withdrawal.
Interbank rates held steady despite the liquidity flood: the Nigeria Overnight Financing Rate (NOFR) closed at 20.00%, overnight rate dipped five basis points to 20.38%, and the Monetary Policy Rate sits at 23.00% after September's 350-basis-point cut. The next MPC meeting this month adds policy uncertainty. A $105.94 million Eurobond coupon payment is also due but excluded from naira projections.
For banks and fixed-income investors, the question is whether the CBN maintains its selective auction approach or returns to aggressive issuance. If selective allotments continue, excess liquidity could push short-term yields lower. If the CBN ramps up fresh OMO sales, much of November's N13.79 trillion could be re-absorbed.
Will you position for lower yields on short-term papers, or bet on the CBN tightening the taps again at the next MPC meeting?