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CBN faces N8.57tn liquidity surge as OMO bills mature - PUNCH
Nigeria’s banking system could see liquidity rise to about N8.57tn this week as Open Market Operations (OMO) bills mature and bond coupon payments are made.
About N2.59tn could enter the financial system from the two sources, adding to the large amount of cash already available to banks.
Data from the Central Bank of Nigeria showed that system liquidity rose to N5.98tn in the week ended 25 September, from N2.86tn the previous week.
The increase followed the repayment of about N2.3tn in OMO bills on 22 September.
Another N2.43tn in OMO bills are expected to mature this week, while bond coupon payments could add about N164bn.
If banks keep most of the funds in the system, total liquidity could rise to around N8.57tn.
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The high level of liquidity was also reflected in banks’ use of the CBN’s Standing Deposit Facility.
Banks placed more than N7tn with the apex bank during the past week, showing that they had large amounts of excess cash.
The fresh inflows could increase the pressure on the CBN to withdraw some of the excess liquidity from the banking system.
The liquidity increase came shortly after the CBN cut its Monetary Policy Rate from 26.5 per cent to 23 per cent.
The 350-basis-point reduction was announced after the Monetary Policy Committee meeting on 22 September.
Following the rate cut, money-market rates fell.
The overnight rate dropped to 20.77 per cent from 22.24 per cent, while the funding rate fell to 20.40 per cent from 22 per cent.
The CBN also reduced the Standing Deposit Facility rate to 20 per cent and set the Standing Lending Facility at 23.50 per cent.
The average Nigerian Treasury bills yield dropped by 90 basis points to 17.89 per cent.
At its latest auction, the Debt Management Office offered N500bn worth of Treasury bills but received bids worth N4.2tn.
Stop rates fell to 15.50 per cent for the 91-day bill, 15.80 per cent for the 182-day bill and 15.89 per cent for the 364-day bill.
The CBN also held an OMO auction on 24 September, offering N1tn in bills.
Investors submitted bids worth N6.1tn, while the CBN allotted N2.3tn.
The latest liquidity increase could lead to more OMO sales as the CBN tries to control the amount of cash in the banking system.
The development will also test the CBN’s new lower-interest-rate policy, as banks prepare to receive another large inflow of funds this week.
