Home Banking Nigeria central bank pays N1.48trn interest on Open Market Sales in 2017

Nigeria central bank pays N1.48trn interest on Open Market Sales in 2017




The Central Bank of Nigeria (CBN) in 2017 mopped up N11.346 trillion from the financial market through Open Market Operations (OMO), spending N1.488 trillion to manage liquidity in the money market. The apex bank also mopped up N647.97 billion from the market last week. According to the Annual Activity Report of the apex bank released at the weekend, the CBN had offered N13.762 trillion at its OMO auctions last year, a steep rise compared to N6.726 trillion which it had offered in 2016. Mop up by the CBN through OMO had intensified last year as subscription and sales dropped below offered amounts as against the trend in the previous year. In 2016, the CBN had offered N6.726 trillion at the OMO auctions as subscription and sales stood at N10.294 trillion and N7.859 trillion. Last year, the total CBN Bills offered at the OMO was N13.762 trillion, while public subscription and sale amounted to N12.344 trillion and N11.346 trillion respectively Consequently, the cost of liquidity management in 2017 increased to N1.488 trillion, from N922.31 billion in 2016

According to the apex bank, the high level of activity was attributable to the increased number of auctions to moderate the excess banking system liquidity, occasioned by the payments of statutory revenue to the three tiers of government, other fiscal disbursements and maturing CBN Bills, amongst others. Meanwhile, N647.97 billion had been mopped up from the market last week through OMO sales and Primary Market Auctions (PMA). It had mopped up N598.365 billion through OMO auctions held on Monday and Friday and PMA held on Thursday. Money market rates, Open Buy Back (OBB) and Overnight (OVN), last week trended lower week on week on the back of changes in system liquidity following the auctions as well as repayments of maturing OMO and PMA bills amounting to N529.118 billion. Despite a reduction in system liquidity which fell to N331.3 billion from N387 billion following an OMO auction of N37.1 billion, OBB and OVN rates trended southwards on the opening trading day of the week – down 13.5 and 15.3 percentage points to 3.7 and 4.4 per cents respectively from 17.2 and 19.7 per cents in the prior week. By midweek, the OBB and OVN rates further fell 1.9ppts apiece to 1.8 and 2.5 per cents respectively even as system liquidity contracted to N290.5 billion.


By Thursday, system liquidity had surged to N1.2 trillion following OMO and T-bills repayments worth N529.118 billion which offset the impact of primary market sale of N49.6 billion on the day, however, OBB and Overnight rates increased 1.1ppts and 1.2ppts to settle at 2.8 and 3.7 per cents respectively. Performance of the Treasury Bills market was mixed as average rate across tenors traded higher on two of four trading sessions in the week. The week opened on a bullish note as average rate across benchmark tenors fell 34 basis points to 12.4 per cent from 12.7 per cent in the preceding trading session. Traders anticipate that money market rates are expected to trade within a similar band this week as OMO maturities worth N216 billion is expected to hit the system. However, the CBN is expected to continue with its liquidity mop-up via OMO sales.

Leadership Newspaper


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