The Central Bank of Nigeria is fighting a liquidity battle on a scale with few precedents in the country's monetary history, and the system keeps refilling faster than it can drain.

Average system liquidity declined by 17.68% week-on-week to ₦4.40 trillion after the CBN mopped up approximately ₦4.55 trillion through liquidity management operations in the final weeks of May 2026, while a separate two-week OMO intervention campaign has seen the CBN absorb a combined ₦6.88 trillion from the banking system in its most sustained sterilisation push of the year.

The most dramatic single session came on May 21. The CBN conducted one of its most aggressive single-session Open Market Operations auctions on May 21, 2026, mopping up a combined ₦3.692 trillion across two instruments. The combined offer of ₦600 billion was overwhelmed by investor demand as total subscriptions hit ₦3.692 trillion, more than six times the amount on offer. The willingness of the CBN to accept all subscriptions signalled a deliberate policy decision to drain as much excess liquidity from the banking system as possible in a single session.

The impact on the Standing Deposit Facility was immediate. SDF balances fell from ₦6.103 trillion on May 20 to ₦5.797 trillion on May 21, then plunged further to ₦2.703 trillion on May 22, a two-day collapse of over 55%, as funds were drawn from bank balance sheets and locked up in OMO instruments.

Yet the relief was temporary. The structural liquidity dynamics driving the surge are enormous. June's projected inflows into the banking system total ₦10.90 trillion, a 3.51% increase from the ₦10.53 trillion recorded in May, with ₦7.77 trillion coming from OMO maturities alone, alongside ₦1.80 trillion in FAAC disbursements and ₦1.05 trillion in treasury bills maturities.

Despite the CBN's aggressive liquidity sterilisation measures in May, during which it withdrew about ₦12.06 trillion from the banking system through various market operations, average system liquidity still rose 7.76% to ₦5.22 trillion, underscoring the resilience of excess cash conditions within the financial sector.

The year-to-date scale of the CBN's intervention is extraordinary. Cumulative OMO sales between January and April 2026 reached approximately ₦30.12 trillion, reflecting the scale of the CBN's efforts to stabilise money market conditions and support its inflation-fighting agenda.

The paradox at the centre of Nigeria's monetary moment is now well defined: a CBN simultaneously cutting interest rates to stimulate credit growth while conducting record OMO sales to prevent excess liquidity from fuelling inflation. Both tools are pulling in the same general direction, disinflation with stability, but the liquidity machine generating ₦10 trillion-plus in monthly inflows makes that balance extraordinarily difficult to maintain. With ₦7.77 trillion in OMO maturities expected in June alone, the CBN may be compelled to intensify its mop-up operations through fresh OMO issuances, treasury bill auctions, or other market interventions to prevent excess liquidity from fuelling inflationary pressures. The flood is not stopping. The question is whether the drain can keep pace.

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