Central Bank puts on hold N700bn treasury bills sale due to funds shortage

The Central Bank of Nigeria has made the decision to cancel the planned N700bn treasury bills auction that was set to take place on 5 August 2026, following a significant tightening of liquidity in the banking system after it absorbed N4.69tn through Open Market Operations over two consecutive sessions.

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This move came on the heels of the CBN absorbing N2.52tn through a 141-day OMO bill on 3 August and another N2.17tn through 112-day and 113-day OMO bills on 4 August, resulting in a substantial withdrawal of liquidity from the banking system.

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The scale of this two-day liquidity withdrawal appears to have prompted the authorities to pause the T-bills auction, likely to avoid exerting additional pressure on the already strained funds available within the banking system, although the CBN did not disclose the reason for the cancellation.

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Market participants have suggested that the timing of the cancellation implies concerns over excessive liquidity tightening, given the significant amount of funds already withdrawn from the system through Open Market Operations.

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The cancelled auction was initially scheduled to offer N700bn across 91-day, 182-day, and 364-day T-bills, with settlement planned for 6 August, as part of the government's efforts to raise domestic financing.

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The latest intervention follows the CBN's previous actions, which included sterilising N7.18tn through OMO auctions in July, bringing the total amount withdrawn through OMO in July and the first four days of August to over N11.8tn.

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The ongoing liquidity squeeze has been further reinforced by strong demand for government securities, as seen at the 29 July T-bills auction where the CBN allotted about N1.25tn against an initial N700bn offer, driven largely by demand for the 364-day bill.

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The authorities are thus faced with the challenge of balancing the need to raise domestic financing with the risk of excessive liquidity tightening in the banking system, as they navigate the complexities of managing liquidity and meeting their financing targets.

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The cancelled auction is part of the N5.8tn T-bills issuance programme for the third quarter of 2026, which aims to achieve about N3.16tn in net new borrowing after accounting for maturing bills, with the 5 August auction being one of six major N700bn issuance sessions scheduled for the quarter.

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The CBN and the Debt Management Office have stated that the other auction dates in the Q3 calendar remain unchanged, leaving investors to speculate about whether the withdrawn N700bn will be rescheduled or added to subsequent auctions.

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The cancellation of the auction could ultimately have an impact on the pace at which the government raises funds through T-bills, particularly if liquidity conditions remain tight and the authorities continue to rely heavily on OMO operations to absorb excess funds, according to experts.