Nigeria’s banking system received a major liquidity injection in February as a total of N4.78 trillion flowed into the market from maturing government securities and federal allocations, Cowry Research revealed in its latest monthly market report on Monday.
The inflows comprised N1.43 trillion from Treasury bill maturities, N1.65 trillion from Open Market Operation (OMO) maturities, and N1.7 trillion from Federal Accounts Allocation Committee (FAAC) disbursements. This surge created favourable conditions for short-term borrowing and eased funding pressures across the financial sector.
The immediate impact was seen in the interbank market, where the overnight Nigerian Interbank Offered Rate (NIBOR) fell sharply by 865 basis points month-on-month to 22.00 per cent. Other key tenors also eased: the 1-month rate declined by 768bps to 22.91%, the 3-month rate fell by 655bps to 23.64%, and the 6-month rate dropped by 666bps to 24.34%.
Cowry Research explained that the broad-based moderation reflects a liquidity-driven relief across the banking system, noting that market participants continue to show strong interest in Treasury bills and bonds. “High demand for Treasury bills and bonds indicates investors are seeking better yields, even as banks find it easier to access funds,” the report said.
The Central Bank of Nigeria’s monetary operations, including the maturation of OMOs and T-bills, have been pivotal in maintaining this liquidity. Combined with regular FAAC disbursements, commercial banks are now in a robust cash position, enabling smoother lending operations and boosting overall market confidence.
Experts say the liquidity surge could have wider economic benefits. Lower interbank rates reduce the cost of short-term funding for banks, which could translate into easier lending conditions for businesses and consumers. “The February liquidity injection is a welcome development. It provides banks with flexibility and could support credit growth if banks translate the improved cash positions into more lending,” they noted.
