Money market

CBN sold N13.8trn worth of OMO through T-bills in 11 months

Story by Kayode Tokede

The Central Bank of Nigeria (CBN) has sold N14 trillion worth of Open Market Operation (OMO) through the Treasury Bills (T-Bills) in 11 months, our Nigeria NewsDirect can report.

OMO is principally used to mop up or inject liquidity into the system as a strategy for monetary management by the CBN. It remained the main too for liquidity management, complemented by discount window activities, reserve management and interventions in the foreign exchange market.

Our correspondent can report that the apex bank between October and November 2019, sold N1.45trillion and N849 billion OMO through the T-Bills respectively.

However, the CBN in the first quarter (Q1) intensifies OMO sales, but it was bearish in the second quarter (Q2) and bullish towards the end of September.

Investigation revealed that the CBN in first quarter sold an accumulative N7.5trillion T-Bills through OMO but it dropped by 73.7 per cent to N1.98 trillion in Q2. In Q3, a sum of N2.02 trillion worth of T-bills was sold via the OMO.

The Cowry Asset Management Limited, Mr. Johnson Chukwu said, activates in Q1 2019 led CBN to increased OMO sales, stressing that the move was to stabilize liquidity.

In his words, “In the period under review, there was a lot of liquidity in the economy due to 2019 general elections. The CBN was trying to mop up in order to manage the level of liquidity.”

The breakdown revealed that, N2.38trillion T-bills was sold through OMO in January but it increased to N2.45 trillion and N2.7trillion in February and March respectively.

Our correspondent gathered that CBN sold N526.5 billion worth of OMO in April; N973.9 billion in May and N476.5 billion in June.

Meanwhile, the CBN sold N475 billion in July, N136.7 billion in August and N1.4 trillion in September.

Chukwu explained that there were a lot of maturities in September.

According to him, “There was a lot of roll over in September that is why the number increased. The CBN had to sell Treasury Bills through OMO in order to pay.”

The Managing Director, Rotimi Fakayejo attributed the mop up by CBN to 2019 elections.

According to him, “the CBN maintained tight naira liquidity during the period of the 2019 elections in a move to mitigate demand pressures on the naira through frequent OMO sales.”

Analysts explained to our correspondent that T-Bills market closed September on a bullish note, as demand for bills across the T-Bills curve.

Reacting also, the Cowry Asset Management Limited, Mr. Johnson Chukwu said, activates in Q1 2019 led CBN to increased OMO sales, stressing that the move was to stabilize liquidity.

In his words, “In the period under review, there was a lot of liquidity in the economy due to 2019 general elections. The CBN was trying to mop up in order to manage the level of liquidity.”

The breakdown revealed that, N2.38trillion OMO was sold through T-bills in January but it increased to N2.45 trillion and N2.7trillion in February and March respectively.

Our correspondent gathered that CBN sold N526.5 billion worth of OMO in April; N973.9 billion in May and N476.5 billion in June.

Meanwhile, the CBN sold N475 billion in July, N136.7 billion in August and N1.4 trillion in September.

Chukwu explained that there were a lot of maturities in September. According to him, “There was a lot of roll over in September that is why the number increased. The CBN had to sell OMO through T-bills in order to pay.”

Analysts explained to our correspondent that T-Bills market closed September on a bullish note, as demand for bills across the T-Bills curve.

According to analysts at Zedcrest Capital, demand to persist once the market resumes trading  this week supported by healthy system liquidity.

“However, the CBN may ramp up aggressive mop-up auctions to manage excess liquidity, increasing the chance for multiple OMO auctions per week,” they explained in latest report.

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