Liquidity in the Nigerian banking system declined in the second quarter of 2025, primarily due to robust auctions of Open Market Operations (OMO) bills, according to the Central Bank of Nigeria (CBN).
The CBN’s economic report for Q2 2025 revealed that the daily average liquidity in the banking system fell to N0.16 trillion, down from N0.25 trillion recorded in Q1 2025. The reduction was largely driven by net withdrawals through instruments such as Nigerian Treasury Bills (NTBs), OMO bills, Federal Government of Nigeria (FGN) bonds, and debits from the Cash Reserve Requirement (CRR) imposed by the CBN.
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The report further noted significant shifts in activity at the standing facilities. Transactions at the Standing Lending Facility (SLF) window fell sharply, with the total value declining by 83.92 per cent to N7.97 trillion, while the Standing Deposit Facility (SDF) window recorded a substantial increase of 153.93 per cent, rising to N48.40 trillion. Applicable rates at the facilities remained unchanged, with the SLF charged at 32.50 per cent (MPR +5%) and the SDF at 26.50 per cent (MPR -1%). The interest rate on converted Intra-day Lending Facility (ILF) transactions to the SLF was maintained at 37.50 per cent (MPR +10%).
The report highlighted significant OMO activity during the review period. The total CBN bills offered, subscribed, and allotted amounted to N5.15 trillion, N9.23 trillion, and N8.16 trillion respectively, across tenors ranging from 104 to 350 days. This contrasted with Q1 2025 figures, which were N2.30 trillion offered, N8.25 trillion subscribed, and N4.57 trillion allotted, for tenors of 347 to 364 days. Bid rates for the period averaged 23.32 per cent (±2.93), while stop rates averaged 23.68 per cent (±1.31). With N4.26 trillion of maturing CBN bills repaid during the quarter, the net liquidity withdrawal totaled N3.90 trillion.
Similarly, NTBs across 91-, 182-, and 364-day tenors saw total offerings, subscriptions, and allotments of N2.86 trillion, N7.47 trillion, and N2.97 trillion respectively, down from Q1 2025 levels of N5.12 trillion offered, N15.20 trillion subscribed, and N5.54 trillion allotted. The average stop rate for NTBs declined to 19.78 per cent (±3.15) from 21.81 per cent (±4.81) in the previous quarter.
FGN bonds, covering 5-, 7-, and 9-year tranches, also experienced a decline in activity. Total offerings, subscriptions, and allotments fell to N0.75 trillion, N1.54 trillion, and N0.80 trillion respectively, compared with N1.10 trillion, N2.41 trillion, and N1.78 trillion in Q1 2025. Average bid and marginal rates moderated to 18.24 per cent (±3.24) and 18.87 per cent (±1.72), down from 22.00 per cent (±7.00) and 20.80 per cent (±1.80) recorded in the preceding quarter.
The relative tightening of liquidity contributed to a slight increase in money market rates, although rates remained within the CBN’s policy corridor. The average interbank call rate edged up to 27.55 per cent, while the Open Repo (OPR) rate rose to 27.70 per cent, representing increases of 0.98 and 0.72 percentage points respectively. Similarly, the Nigeria Interbank Offered Rate (NIBOR) call rate and 30-day NIBOR rate increased to 27.47 per cent and 27.33 per cent, from 26.98 per cent and 27.08 per cent in Q1 2025. With the monetary policy rate (MPR) maintained at 27.50 per cent and an asymmetric corridor of +500/-100 basis points, money market rates remained aligned with policy parameters.
The report also noted marginal changes in lending and deposit rates. The average prime lending and maximum lending rates declined slightly by 0.09 and 0.34 percentage points to 18.18 per cent and 29.82 per cent respectively, while the weighted average term deposit (WATD) rate increased by 0.30 percentage points to 9.93 per cent. Consequently, the average spread between the WATD rate and the maximum lending rate narrowed marginally to 19.89 percentage points from 19.93 percentage points in the previous quarter.
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Consumer credit continued to expand during Q2 2025, increasing by 6.48 per cent to N4.27 trillion relative to end-March 2025, driven largely by higher loan demand during the Salah festivities. Disaggregating the consumer credit portfolio, personal loans accounted for 54.10 per cent of total credit, while retail loans comprised the remainder. Personal loan outstanding grew by 4.52 per cent to N2.31 trillion, and retail loans increased by 8.89 per cent to N1.96 trillion over the same period.
Overall, the CBN’s report illustrates that the contraction in banking system liquidity in Q2 2025 was primarily a result of proactive monetary operations aimed at managing excess liquidity, including the sale of OMO bills and NTBs, coupled with the repayment of maturing instruments. While money market rates adjusted modestly, lending and deposit rates remained broadly stable, and consumer credit growth reflected continued demand from households and businesses, underpinning ongoing economic activity.
