Nigeria’s central bank is turning to a market it locked individuals out of seven years ago as a fresh line of defense against an anticipated wave of election-related spending.
The Central Bank of Nigeria has reversed a 2019 restriction that confined its Open Market Operations bills, which are among the highest-yielding, lowest-risk instruments in the naira market, to banks and select institutional players.
Under the revised framework, individuals, corporates and non-bank financial institutions can now participate in both primary and secondary OMO markets, bidding and settling transactions through Deposit Money Banks.
The reversal is one part of a broader liquidity overhaul. The CBN has also eased restrictions on banks’ access to its Standing Lending Facility, or Discount Window, removing curbs tied to participation in foreign exchange transactions and primary auctions of government securities.
One restriction remains in place: institutions that tap the Discount Window still cannot bid in OMO auctions on the same day.
Ayodele Akinwunmi, chief economist at United Capital Plc, said the latest measures represent an aggressive liquidity management strategy by the CBN ahead of election-related fiscal spending.
He said the CBN’s aggressive liquidity mop-up strategy is timely, particularly ahead of the expected increase in election-related campaign spending and the substantial expansion in broad money supply (M3) observed in the market.
According to him, the approach is preferable to an outright increase in the Monetary Policy Rate (MPR), as it allows the CBN to address excess liquidity more directly while avoiding an unnecessarily broad tightening of monetary conditions.
Akinwunmi said while the liquidity mop-up may initially exert some upward pressure on interbank money-market rates, subsequent moderation in rates is expected to be gradual rather than drastic.
‘This should enable the CBN to maintain effective control of system liquidity and anchor inflation expectations without imposing excessive pressure on economic activity and credit conditions,’ he said.
He added that the latest OMO policy would create an additional outlet for investors in the financial market.
The data illustrates just how much the banking system’s liquidity position has already shifted. Banks’ use of the Standing Lending Facility collapsed to N3.52 trillion in July 2026, down from N65.53 trillion in July 2025 and N75.18 trillion in July 2024, and even below the N11.16 trillion recorded in July 2023. It remains only slightly under the N5.77 trillion posted in July 2022.
The mirror image of that decline shows up in the Standing Deposit Facility, where banks park excess liquidity with the CBN rather than borrow from it. SDF utilization surged to N595.37 trillion in July 2026 from N2.32 trillion in July 2022 – a roughly 257-fold increase – and jumped 646 percent from N79.85 trillion in July 2025 alone. On a single-day basis, deposits rose 49.39 percent to a three-month high of N6.14 trillion on Thursday, up from N4.11 trillion the day before, a level last matched on May 29, 2026, when SDF hit N6.10 trillion.
The reversal in positioning is stark. In July 2024, banks drew N75.18 trillion through the SLF against just N10.35 trillion parked in the SDF. Two years later, the relationship has flipped entirely: N3.52 trillion borrowed versus N595.37 trillion deposited.
The CBN cautioned that the SDF figure reflects utilization over the period rather than a single point-in-time balance, but said the scale of the increase underscores how much more banks are now using the facility to place liquidity with the apex bank rather than draw from it.
A Return to Orthodoxy
Okey Umeano, acting director of the Financial Markets Department, said the changes followed a review of ‘existing market practices and developments in the foreign exchange, money, and fixed-income markets,’ alongside a broader assessment of the frameworks governing the Standing Lending Facility, Tenored Repo Operations and OMO participation.
Ayokunle Olubunmi, head of Financial Institutions Ratings at Agusto and Co., framed the moves as part of a longer arc back toward conventional central banking. ‘This is part of the return to orthodox monetary system,’ he said. ‘Recall that these restrictions were not there before the last FX crisis.’
Alongside the OMO and Discount Window changes, the CBN lifted its suspension of Tenored Repo Operations, restoring the bank’s ability to conduct repos across tenors of four to 90 days, a move it said would support liquidity management, improve money-market functioning and strengthen monetary policy transmission. For banks, tenored repos add a channel for managing liquidity beyond the overnight market and could ease reliance on shorter-term funding.
What Wider Access Could Cost
Analysts at Quest Merchant Bank Limited said the reforms should deepen activity across the money and fixed-income markets and signal growing confidence in FX stability, reserve adequacy and broader market conditions.
The analysts however said broader investor participation could accelerate yield compression over time, potentially trimming treasury income for banks and moderating the carry appeal of naira assets.
The reforms, therefore, mark a broader shift in the CBN’s liquidity-management framework, coming at a time when banks are making far greater use of the deposit facility and considerably less use of the lending window.