CBN’s cash squeeze puts pressure on banks and businesses
The Central Bank of Nigeria (CBN) has intensified its efforts to control inflation and stabilise the naira by draining excess cash from the banking system. This move has pushed the interbank deficit to N4.1tn, making it more expensive for banks and businesses to access funds. Analysts note that the CBN’s strategy involves high-yield government bills and strict liquidity management. Despite these measures, investor demand for government securities remains strong.
TLDR
- The CBN has engineered a significant cash shortage in the banking system, with the interbank deficit at N4.1tn.
- High-yield Open Market Operation (OMO) bills worth N600bn were used to mop up excess liquidity.
- Investor demand for government securities remains robust, with 140-day and seven-day bills heavily oversubscribed.
- Liquidity segmentation is increasing, as large banks hold surpluses while smaller banks face deficits.
- Interbank funding rates have stayed stable, indicating that banks have adjusted to the CBN’s tight monetary policy.
