N5.53trn floods banking system as CBN battles excess liquidity

The amount of cash available in Nigeria’s banking system jumped to N5.53 trillion in May 2026, putting the Central Bank of Nigeria (CBN) under pressure to mop up excess liquidity even as millions of Nigerians continue to face economic hardship.

The May figure represents a 17.16 per cent rise from the N4.72 trillion average net liquidity recorded in April.

The CBN disclosed this in its Monthly Economic Report for May 2026, attributing the increase mainly to inflows from maturing CBN bills, bond coupons and disbursements through the Federation Account Allocation Committee (FAAC).

Other factors, including Cash Reserve Ratio (CRR) maintenance and foreign exchange operations, also shaped liquidity conditions during the period and helped keep short-term interest rates stable.

Investors scramble for CBN bills

In response to the liquidity surplus, the apex bank significantly increased its Open Market Operations (OMO).

The CBN offered N3.6 trillion in CBN bills, but demand soared to N14.4 trillion, meaning investors subscribed for several times the amount offered.

The bank ultimately allotted N12.54 trillion at stop rates between 19.97 per cent and 21.90 per cent.

The CBN said the exceptionally high level of subscriptions was driven by the combination of surplus liquidity and attractive investment returns.

“The higher-than-expected subscription reflected liquidity surfeit and attractive returns,” the apex bank stated.

It added: “Overall, the liquidity operations of the Bank resulted in net withdrawal from the banking system.”

NTBs attract N4.4trn subscriptions

The Federal Government also continued to attract strong demand through its domestic debt instruments.

Subscriptions for Nigerian Treasury Bills reached N4.4 trillion in May, compared with the N1.35 trillion initially offered by the government.

The 364-day tenor attracted the largest share of investor interest.

Demand was also strong for longer-term Federal Government of Nigeria bonds.

The government offered N0.60 trillion worth of 10-year and 20-year FGN bonds, but subscriptions reached N0.80 trillion.

The stop rates for the bonds were between 17.00 per cent and 17.04 per cent.

The CBN said the strong demand for the bonds reflected their attractive returns as well as sustained investor confidence in government securities.

The developments point to a financial system holding substantial liquidity, with the CBN using its monetary operations and government securities to absorb part of the excess cash and manage liquidity conditions.

At the same time, the high level of subscriptions for both short- and long-term government securities indicates strong investor demand for relatively high-yielding instruments in Nigeria’s financial market.

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