The Central Bank of Nigeria (CBN) injected about N2.87 trillion back into the banking system in October as maturing Open Market Operations (OMO) bills exceeded new issuances.
The CBN sold N6.182 trillion in new OMO bills during the month, while N9.051 trillion in previously issued bills matured, leaving a net N2.87 trillion to flow back to banks. Nairametrics
The development reversed the liquidity-tightening trend recorded in September, when the CBN sold N17.51 trillion in OMO bills against N10.89 trillion in maturities, effectively withdrawing about N6.62 trillion from the banking system.
According to the Financial Markets Dealers Association, banking-system liquidity rose 56.75 per cent to N7.373 trillion in October from N4.703 trillion in September.
However, the increase in available bank liquidity has not translated into significantly cheaper short-term borrowing.
Interbank overnight rates remained around 20 per cent, while the CBN’s benchmark Monetary Policy Rate stood at 23 per cent following its September reduction.
Meanwhile, average Treasury Bills yields fell to 17.88 per cent, with 91-day, 182-day and 364-day instruments recording yields between 15.40 and 15.80 per cent.
The decline in Treasury Bills yields was attributed largely to strong investor demand relative to the limited volume of bills offered by the Debt Management Office.
The FMDA expects another N13.79 trillion to flow into the financial system in November from maturing securities and government payments, putting renewed pressure on the CBN to manage excess liquidity.
The key question is whether the apex bank will absorb much of the inflow through fresh OMO sales or allow more cash to remain with banks.
