The Central Bank of Nigeria (CBN) has disclosed that it sent a total of N2.114trillion to manage liquidity in the economy over the 12 months of 2018, representing 42.01per cent increase over N1.488trillio in 2017.
According to the 2018 Annual Activity Report, CBN disclosed that a total bills offered at the Open Market Operation (OMO) auctions increased to N34.61trillion; of which N24.916trillion subscribed, while N22.35trillion was and sold; compared with N13.762trillion; N12.344trillion; and N11.346trillion, respectively, in 2017.
The report stated that, “The high level of activity during the review period 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.”
The total request for repurchase transactions for the period under review, however, fell by 12.65per cent to N966.06billion from N1.105trillion in the prior year, with the applicable interest rates ranging from 18.50 to 19.50per cent for the 4- to 90-day tenors, same as in the preceding year. Total interest earned on repo fell by 27.87per cent to N23.55billionn, from N32.65billion in 2017, a situation the apex bank blamed on increased net liquidity in the system.
Within the period also, the CBN said banks were less frequent at the Standing Lending Facility (SLF) than in 2017, due to increased net system liquidity.
The remunerable threshold for daily deposits per institution at the Standing Deposit Facility (SDF), where they deposited excess funds at the end of each business day to square-up their positions remained N7.5billion.
This, the report stressed, “was to curtail unbridled requests by market participants and encourage lending to the real economy,” even as applicable rates which were anchored on the benchmark Monetary Policy Rate (MPR) for the SLF and SDF also remained 16.00 and 9.00% respectively, same as in 2017.
The average daily request for SLF was ¦ 48.44bn in 234 transaction days, out of which ILF conversion averaged ¦ 30.43bn, amounting to 62.82% of average daily requests, with an average daily interest charge of ¦ 35.81m. In the previous year, average daily request for SLF was ¦ 216.34 billion in 246 transaction days, out of which ILF conversion was ¦ 130.63bn or 60.38%, while average daily interest income stood at ¦ 159.96m.
“The reduction in patronage at the window in 2018 reflected the higher levels of injections into the banking system,” the report added.
On the SDF window, patronage increased to an average daily amount of N84.27billionn for the 246 transaction days in 2018, up from N41.9billion for the 230 transaction days in 2017.
Also, average daily interest payments on the deposits increased to N30.51million in the review period, from N14.86million in 2017, with the increased transaction volume due to higher levels of banking system liquidity.
The value of inter-bank funds market transactions dropped by 94.95per cent to N1.661trillion in 2018, from N32.91trillion in 2017, with Open Buy Back (OBB) transactions accounting for 96.35per cent, while transactions at the unsecured inter-bank segment accounted for the balance of 3.65per cent, compared with 94.83 and 5.17per cent, respectively in 2017.
A breakdown of the transactions showed an appreciable decline in call placements by 96.22per cent to N60.70 billion, from N1.603trillion in 2017; just as transactions at the OBB segment decreased substantially, by 94.87per cent to N1.601trillion, from N31.207trillion in 2017.
“The sharp decline in the volume of transactions in 2018 was traceable to the banking system preference for OMO auctions.”