The Central Bank of Nigeria (CBN) has repaid ₦2.07 trillion in Open Market Operation (OMO) bill repayments to investors.
This is as the Nigerian financial system saw a liquidity spike of over 40% on Tuesday, triggered by the bill repayment to eligible investors.
The apex bank settled ₦2.07 trillion in OMO repayments, a move that has substantially improved money market conditions.
While this influx provides a boost to the financial system, analysts suggest it could also heighten Nigeria’s inflation risks.
According to data from Meristem Securities Limited, system liquidity climbed by 40.17%, reaching a total of ₦6.90 trillion.
The investment bank also noted that the balance of the Standing Deposit Facility (SDF) saw a marginal decline of 1.43%, settling at ₦4.57 trillion.
Despite the surge in available funds, money market rates remained relatively stable; the Overnight (OVN) rate stood at 22.21%, while the Open Repo (OPR) rate held at 22.00%.
Market experts anticipate that short-term benchmark rates will remain tight. Even as liquidity remains strong, the CBN has already moved to mop up excess funds, selling approximately ₦1.6 trillion in short-term investment securities during an OMO auction conducted on Tuesday.
This rotation of funds by Deposit Money Banks into the Central Bank’s standing facilities serves as a low-risk alternative to traditional lending, further fueling the current liquidity dynamics within the Nigerian economy.