The Central Bank of Nigeria (CBN) reduced the pace of its liquidity sterilisation campaign in July, withdrawing N7.18 trillion from the financial system through Open Market Operations (OMO) auctions, even as demand for the instruments remained significantly strong.
The July figure represents a 48.57 per cent decline from the N13.96 trillion the apex bank absorbed in June, according to data compiled from CBN’s OMO auction results for both months.
The sharp drop was largely driven by a reduction in auction frequency. While the CBN conducted seven OMO auctions in June, it held only three in July, indicating a shift from a frequent intervention strategy to one focused on fewer but larger-scale liquidity withdrawals.
The June auctions were conducted on June 2, 8, 11, 22, 23, 29 and 30, with total allotments reaching N13.96 trillion. In comparison, July’s auctions held on July 13, 14 and 28 generated a combined allotment of N7.18 trillion.
June Records Heavy Liquidity Absorption Through Frequent Auctions
June emerged as the most aggressive month for OMO sterilisation so far in 2026, with the CBN maintaining a consistent presence in the market.
During the month, the apex bank offered N600 billion at each of the seven auctions, bringing the total offer size to N4.2 trillion. However, investor demand far exceeded supply, with total subscriptions reaching approximately N15.27 trillion.
The CBN ultimately allotted N13.96 trillion, accepting about 91.42 per cent of all bids submitted.
The June 2 auction recorded the strongest investor appetite, attracting N2.15 trillion in bids and resulting in an allotment of N2.01 trillion.
The June 8 auction recorded the lowest subscription level for the month, with investors submitting N1.73 trillion in bids, of which N1.51 trillion was allotted.
The month ended with back-to-back auctions on June 29 and June 30. The June 29 sale recorded the second-highest allotment of the month at N1.78 trillion, while the June 30 auction was oversubscribed by 3.13 times, with the CBN allotting N1.52 trillion.
Overall, June’s auctions recorded average oversubscription of 3.16 times the amount offered, reflecting strong demand from investors seeking high-yielding short-term instruments.
July Auctions Smaller in Number but Larger in Scale
Although July featured fewer auctions, each sale attracted heavier demand compared with the previous month.
The CBN offered N600 billion at each of the three auctions, amounting to N1.8 trillion in total planned issuance. However, investor subscriptions pushed the average oversubscription ratio to approximately four times the amount offered.
The July 28 auction stood out as the largest single OMO allotment across both June and July, with the CBN absorbing N3.5 trillion in one transaction.
The development suggests that while the central bank reduced the number of market interventions, it relied on larger transactions to achieve its liquidity management objectives.
Longer-Dated OMO Instruments Attract Strong Investor Demand
The 127-day tenor emerged as the preferred instrument among investors during both months.
The instrument dominated demand across several June auctions and remained highly sought after in July, particularly during the July 13 auction, where it attracted N1.854 trillion in bids.
Interest rates on OMO instruments also remained elevated throughout the period. Stop rates in June ranged between 20.39 per cent and 22.65 per cent, with shorter-tenor securities generally clearing at higher rates than longer-dated instruments.
The same pattern continued into July, reflecting investors’ continued preference for attractive yields amid the prevailing monetary policy environment.
CBN Maintains Tight Liquidity Management Stance
The contrasting figures between June and July highlight two different approaches adopted by the CBN in managing liquidity conditions.
June’s strategy was based on frequency, with repeated auctions throughout the month allowing the bank to steadily remove excess liquidity from the banking system. The N13.96 trillion absorbed during the month remains the highest monthly OMO sterilisation figure recorded in 2026 so far.
July, however, relied on scale. With fewer auctions, the central bank achieved significant withdrawals through larger individual transactions, particularly the N3.5 trillion allotment recorded at the end of the month.
Despite July’s decline, the combined impact of both months has pushed the CBN’s liquidity absorption efforts above previous levels for the year.
OMO Sterilisation Surpasses N50 Trillion in 2026
Before June and July, cumulative OMO sales between January and May 2026 had already exceeded N30.12 trillion.
With the additional N21.14 trillion withdrawn during June and July, total OMO sterilisation for the year has now surpassed N50 trillion.
The scale of the intervention highlights the growing importance of OMO auctions as a major instrument in the CBN’s efforts to control liquidity, influence short-term interest rates and maintain its restrictive monetary policy stance.
OMO bills remain separate from Nigerian Treasury Bills issued by the Debt Management Office (DMO), as they are primarily used by the central bank for monetary policy operations rather than government borrowing.
Market Eyes August Auction Direction
Attention has now shifted to the CBN’s August auction schedule, with market participants monitoring whether the apex bank will continue with aggressive liquidity withdrawals or adopt a more measured approach.
Analysts and dealers are also watching how OMO auctions compete with Treasury Bills and Federal Government bond offerings, which are expected to draw from the same pool of investor funds.
The outcome of August’s auctions could provide further insight into the CBN’s liquidity management priorities and the direction of short-term interest rates in the coming months.