CBN shelves N700bn T-bills auction amid liquidity squeeze

The Central Bank of Nigeria (CBN) has canceled its planned N700 billion treasury bills auction for August 5, 2026. This decision comes after the bank aggressively withdrew liquidity from the banking system, absorbing N4.69 trillion over two consecutive sessions through Open Market Operations (OMO).

The substantial liquidity withdrawal included N2.52 trillion via a 141-day OMO bill on August 3 and another N2.17 trillion through 112-day and 113-day OMO bills on August 4. Market participants believe the scale of these withdrawals prompted the authorities to pause the T-bills auction to avoid exacerbating the tightness of funds available within the banking system.

While the CBN did not officially state a reason for the cancellation, the timing suggests concerns about excessive liquidity tightening. The auction was intended to offer N700 billion across various tenors (91, 182, and 364-day bills). This intervention follows a pattern of significant liquidity sterilization, with the CBN having already withdrawn N7.18 trillion through OMO auctions in July.

Experts note that the authorities face a delicate balancing act between raising domestic financing for the government and preventing excessive liquidity tightening. The canceled auction was part of the N5.8 trillion T-bills issuance program for the third quarter, which aims for substantial net new borrowing. It remains to be seen whether the withdrawn N700 billion will be rescheduled or added to future auctions, potentially impacting the pace of government fundraising if liquidity conditions remain constrained.