CBN mops up N15.68trn through OMO in 11 months

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Stories by Kayode Tokede

The Central Bank of Nigeria (CBN) mopped up N15.68trillion from the financial 1market through Open Market Operations (OMO) in 11 months of 2018.

In 11 months of 2017, an accumulative N7.73 trillion was mopped up from the system through the CBN’s OMO.

OMO refers to the buying and selling of government securities in the open market in order to expand or contract the amount of money in the banking system.

The apex bank in its financial data disclosed that November this year had the highest OMO sales of about N2.38 trillion while February with N619 billion, had the lowest OMO sales.

According to the CBN data, a total N1.26 trillion OMO was sold in October; N1.02 trillion OMO was sold in September and N991 billion worth of OMO was sold in August.

The CBN in its economy report for third quarter said, it sold OMO tenors to maturity of the instruments ranged from 49 days to 364 days.

According to the report, a total amount offered, subscribed to and allotted were N7 trillion, N3.86 trillion, and N3.33 trillion, respectively.

“The bid rates ranged from 10.0000 per cent to 15.5000 per cent, while the stop rates ranged from 10.0000 per cent to 13.5000 per cent. Repayment of matured CBN bills amounted to N4,997.52 billion, translating to a net injection of N1,670.01 billion” the third quarter report by CBN explained.

The data further disclosed that OMO sales in July worth N1 trillion; N1.3 trillion worth of OMO was sold in June and N1.25 trillion accumulative OMO was sold in May.

Between April and March, N2.02 trillion and N1.63 OMO sales respectively, while in January, a total N2.19 trillion worth of OMO was sold by CBN.

The CBN had maintained that the high level of activity in the OMO 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.

However, last week, market liquidity indicators, Open-Buy-Back (OBB) and Overnight Call (O/N) rates rose to 17.36per cent and 16.57per cent respectively compare to the previous week rate of 6.58per cent and 5.83per cent.

This implies low liquidity in the money market. This development was aided by the CBN OMO mop-up in two different sessions.

On Monday, the CBN successfully mop-up N164.6 billion through OMO bills auction, followed by another N472.3 billion successful OMO auction on Thursday.

These together (N636.9 billion) offset inflows from matured OMO bills which stood at N443.7 billion.

Analysts at GTI Securities Limited said “In the next trading week, we expect system liquidity to gain traction as inflows from maturing OMO bills to the tune of N684.8 billion hit the money market.

“However, we expect the apex bank to respond with OMO sale to keep system liquidity at bay in its quest to curtail inflation,” they explained in their weekly report.

Meanwhile, the Naira last week weakened against the Dollar at the official window but gained marginally at the Investors &Exporters Foreign Exchange windows (I & E FX).

The official rate monitored by CBN shed 0.02 per cent to close the week at N306.80/Dollar as against the previous week closing rate of N306.75/Dollar, while it gained 0.002 per cent at the I&E FX window to close the week at N364.10/dollar as against N364.70/dollar last Friday.

In the meantime, the foreign reserves last week rose for the first time since June by $247.1million to $42.07 billion.

“This reverse trend, we believe was aided by proceed from the $2.5 billion Eurobond floated in November, 2018 by the federal government,”analysts at GTI Securities Limited added.

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