Nigeria’s banking system continues to sit on massive liquidity levels, with funds remaining above N8 trillion despite a major intervention by the Central Bank of Nigeria to drain excess cash.
Midweek data show the apex bank conducted an Open Market Operations auction worth about N2.36 trillion to tighten conditions and reduce surplus funds in circulation.
While the move initially squeezed liquidity, the effect proved short-lived as balances quickly rebounded across the system.
At the start of the week, liquidity stood above N8 trillion before briefly dropping after the intervention.
However, deposits surged again, reflecting strong underlying inflows and persistent excess cash within the financial system.
The News Chronicle understands that banks have continued to channel surplus funds into the Central Bank’s deposit window, taking advantage of attractive risk-free returns. This trend has kept liquidity elevated despite repeated efforts to absorb it.
Analysts say the situation highlights structural imbalances, with inflows from maturing securities and limited absorption capacity sustaining the cash glut.
They warn that prolonged excess liquidity could create pressure on interest rates and encourage speculative activities, particularly in the foreign exchange market.
The development suggests that the Central Bank may need to maintain aggressive and sustained liquidity management measures to stabilise market conditions in the near term.
