The Central Bank of Nigeria (CBN) on Thursday mopped up excess liquidity in the banking system to the tune of N800 billion via Open Market Operation (OMO) with longer term instrument under subscribed.
OMO is a monetary policy instrument used by the CBN to control the volume of money in the banking and finance sector of the economy.
The breakdown of the OMO auction shows that N650 billion was offered for 231 days tenor at the spot rate of 12.15 percent. The instrument which matures on January 17, 2019 was undersubscribed as a total sale of N560 billion was recorded.
For the 112 days tenor which matures on September 20, 2018, the CBN offered a total of N150 billion in treasury bills at the spot rate of 11.05 percent. The offer was oversubscribed with a total sale of N 348.70 billion.
Ayodeji Ebo, managing director, Afrinvest Securities limited, explained that the reason for the undersubscription at the OMO auction on thursday was on the back of the attractive yields in the T-Bills secondary market. Similar maturities trade around same levels in the secondary market.
“If this persists, the CBN may be force to make the rates more attractive to achieve its objective of managing system liquidity as well as reduce pressure on the foreign exchange market,” he said in an emailed note to BusinessDay.
The mop up follows inflows from Wednesday maturing FGN May 2018 bond (N300.0bn) as well as N176.3 billion OMO and N99.2 billion T-Bills maturity, which hit the system on Thursday. Last week, there was an inflow from Federation Account Allocation Committee (FAAC) allocation to the States and local governments estimated at about N250.0 billion. On Thursday last week, a total of N267.0 billion worth of maturing OMO instruments hit the system.
This resulted in the decline of Open Buy-back (OBB) and Overnight (OVN) rates by 8.9ppts and 10ppts to 7.8 percent and 8.4 percent respectively.
At the foreign exchange market, naira further appreciated by N1.00k to N363 per dollar from N364/$ traded the previous day at the black market. Naira last week weakened to N367/$ from N362/$. The CBN on Wednesday injected a total of $210 million to boost liquidity in the foreign exchange market. The bank offered the sum of $100 million to authorized dealers in the wholesale segment of the market, while interest in the Small and Medium Enterprise (SMEs) segment received the sum of $55 million. Also the sum of $55 million was appointed to invisibles such as, tuition fees, medical payments and Basic Travel Allowance (BTA).
As a way to confirm if the deposit money banks are actually following the directives given by the CBN on fgorex sales to customers, Business Day went out to visit some banks including, Zenith, Access, Keystone and Fidelity bank, to find out about the sale of foreign currency to customers.
The investigation shows that banks that have dollars to sell are requesting for international passport, VISA for BTA and directing customers to open account in order to access forex for school fees. However, some of the banks did not have dollars for sale.
The CBN had recently ordered banks not to deny genuine travellers Personal Travel Allowance (PTA) and Business Travel Allowance (BTA) as there are enough dollar supplies to meet the demand.