CBN Tightens Grip: Fresh OMO Issuance Targets N784bn Liquidity Surge
Detailed Breakdown:
The Central Bank of Nigeria (CBN) is preparing to issue fresh Open Market Operation (OMO) bills this week as part of its efforts to tighten liquidity in the financial system and manage inflation. This move is in response to an anticipated N784 billion inflow into the banking system from maturing securities.
Where the Inflows Are Coming From:
• OMO maturities worth N459.6 billion are expected to hit the market today.
• Nigerian Treasury Bill (NTB) maturities of N324.41 billion will follow on Thursday.
• As of September 1, 2025, banking system liquidity stood at N275.9 billion, a 10.4% rise from the previous week’s N249.8 billion.
Why OMO Matters:
OMO is one of the CBN’s most important monetary policy tools. By selling OMO bills, the apex bank borrows from banks and investors in exchange for short-term securities. This action absorbs excess liquidity, reduces inflationary pressure, and stabilises the naira.
Market Dynamics:
• A N480 billion NTB auction scheduled for Wednesday is expected to further mop up liquidity.
• Last week, system liquidity jumped to N1.40 trillion, a sharp turnaround from a deficit of N609.43 billion the previous week, thanks to FAAC disbursements and earlier OMO maturities.
• Interbank lending rates eased, with the Open Repo Rate (OPR) and Overnight (OVN) rate dropping to 26.50% and 26.95%, respectively.
• In the secondary market, T-bills yields rose to an average of 22.18%, while OMO bills yields eased slightly to 25.49%.
The Bigger Picture:
• CBN’s liquidity mop-up through OMO sales has grown 79% year-on-year, with N13.35 trillion withdrawn in 2025 so far, compared to N7.45 trillion in the same period of 2024.
• Under Governor Olayemi Cardoso, the CBN has pursued one of the most aggressive tightening cycles in recent history.
• OMO has also been used strategically to attract foreign portfolio inflows, boosting FX liquidity and strengthening the naira. Elevated OMO yields—peaking at 24.4% in September 2024—have made Nigerian assets attractive for carry trades against U.S. treasuries.
Impact on Inflation and Investment:
• Nigeria’s headline inflation eased for the fourth consecutive month, slipping from 22.22% in June to 21.88% in July 2025. Though modest, this reflects the traction of the apex bank’s disinflation drive.
• Analysts at Coronation Merchant Bank expect OMO issuances to push yields upward in the near term, as tighter liquidity keeps rates elevated.
• For investors, this creates an environment where fixed income assets (OMO bills, T-bills, bonds) remain highly rewarding, especially relative to global benchmarks.
✨ Investor Takeaway:
The CBN’s aggressive OMO issuance signals its determination to fight inflation, stabilise the naira, and attract foreign capital. For investors, this tightening environment offers lucrative opportunities in short-term government securities, while also hinting at continued high yields in the bond and treasury bill markets.
Detailed Breakdown:
The Central Bank of Nigeria (CBN) is preparing to issue fresh Open Market Operation (OMO) bills this week as part of its efforts to tighten liquidity in the financial system and manage inflation. This move is in response to an anticipated N784 billion inflow into the banking system from maturing securities.
Where the Inflows Are Coming From:
• OMO maturities worth N459.6 billion are expected to hit the market today.
• Nigerian Treasury Bill (NTB) maturities of N324.41 billion will follow on Thursday.
• As of September 1, 2025, banking system liquidity stood at N275.9 billion, a 10.4% rise from the previous week’s N249.8 billion.
Why OMO Matters:
OMO is one of the CBN’s most important monetary policy tools. By selling OMO bills, the apex bank borrows from banks and investors in exchange for short-term securities. This action absorbs excess liquidity, reduces inflationary pressure, and stabilises the naira.
Market Dynamics:
• A N480 billion NTB auction scheduled for Wednesday is expected to further mop up liquidity.
• Last week, system liquidity jumped to N1.40 trillion, a sharp turnaround from a deficit of N609.43 billion the previous week, thanks to FAAC disbursements and earlier OMO maturities.
• Interbank lending rates eased, with the Open Repo Rate (OPR) and Overnight (OVN) rate dropping to 26.50% and 26.95%, respectively.
• In the secondary market, T-bills yields rose to an average of 22.18%, while OMO bills yields eased slightly to 25.49%.
The Bigger Picture:
• CBN’s liquidity mop-up through OMO sales has grown 79% year-on-year, with N13.35 trillion withdrawn in 2025 so far, compared to N7.45 trillion in the same period of 2024.
• Under Governor Olayemi Cardoso, the CBN has pursued one of the most aggressive tightening cycles in recent history.
• OMO has also been used strategically to attract foreign portfolio inflows, boosting FX liquidity and strengthening the naira. Elevated OMO yields—peaking at 24.4% in September 2024—have made Nigerian assets attractive for carry trades against U.S. treasuries.
Impact on Inflation and Investment:
• Nigeria’s headline inflation eased for the fourth consecutive month, slipping from 22.22% in June to 21.88% in July 2025. Though modest, this reflects the traction of the apex bank’s disinflation drive.
• Analysts at Coronation Merchant Bank expect OMO issuances to push yields upward in the near term, as tighter liquidity keeps rates elevated.
• For investors, this creates an environment where fixed income assets (OMO bills, T-bills, bonds) remain highly rewarding, especially relative to global benchmarks.
✨ Investor Takeaway:
The CBN’s aggressive OMO issuance signals its determination to fight inflation, stabilise the naira, and attract foreign capital. For investors, this tightening environment offers lucrative opportunities in short-term government securities, while also hinting at continued high yields in the bond and treasury bill markets.