In its move to manage liquidity, the Central Bank of Nigeria (CBN) has reported N17.5 trillion Open Market Operation (OMO) sales in 2018.
Information obtained from the apex bank official website revealed increased OMO sales in December and January of 2018.
According to financial data of the CBN, an accumulative N2.08 trillion and N1.97 trillion worth of OMO was sold in January and December 2018 respectively.
The CBN OMO bills were utilised as the main instrument for liquidity management. The bill auctions were also used to boost tradable securities and increase activities in the secondary market.
As a result of its restrictive monetary policy, the apex bank intensified its mop up of excess liquidity in the system by sale of treasury bills with OMO.
The CBN does not only use OMO; it also uses Treasury Bills and Federal Government Bonds to stem inflationary pressure and curtail liquidity arising from maturing bills.
According to CBN, OMO sales have attracted rates between 17.5 per cent and 18.5 per cent, a move to keep the foreign exchange stable.
The apex bank in 2017 offered OMO bills worth N13.76 trillion, while total public subscription and sale amounted to N12.3 trillion and N11.34 trillion, respectively, compared with N6.73 trillion, N10.29 trillion and N7.86 trillion offered, subscribed and sold, respectively, in 2016.
According to CBN, “the increase in sale of CBN bills, in the review period, was attributed, largely, to increased number of OMO auctions conducted to curb excess liquidity, occasioned by maturing CBN bills, monthly disbursement of statutory revenue and swaps transactions to avoid liquidity surfeit in the banking system.”
The managing director, Maxifund Investments and Securities Limited, Mr. Okechukwu Unegbu, had attributed the increased OMO sales to improved economy and policy stance of the CBN.
He noted that OMO sales have impacted on the capital market and money market as investors are reaping from the daily auction.
His words, “OMO is one of the instruments CBN used in controlling money in circulation, making sure the rate of inflation is reduced. Investors will always go to where it is easy for them in terms of reaping their investment, be it short-term or long-term.
“The increased OMO sales by CBN have boosted the economy further and both capital market and money market are benefitting, as policy direction of the CBN has proven working this year”.
CBN Governor, Mr. Godwin Emefiele, in last month predicted that monetary policy stance would remain judicious, research-driven, adequate and supportive of the real economy subject to underlying fundamentals.
He pointed out that the current tight stance was expected to continue in the near-term, especially in view of rising inflation expectations and exchange market pressures.
He explained, “Though we will act to appropriately adjust the policy rate in line with unfolding conditions and outlooks, the CBN will continue to ensure that the policy interest rate is delicately set to balance the objectives of price stability with output stabilisation.
“With favourable oil price developments and continued efforts at driving indigenous production in high-impact real sector activities, especially agriculture and manufacturing, Gross Domestic Product (GDP) is expected to pick-up in the remaining two quarters of 2018.”
Despite maturity of N547 billion worth of OMO bills last week, money market rates increased in the outgone week as Overnight and Open-Buy Back rates rose from 18.42 per cent and 17.17per cent to close at 23.75 per cent and 20 per cent respectively. The increase in rates may have been supported by the sales of N579 billion worth of OMO bills as well as retail foreign exchange interventions sales.
SOURCE: Nigeriannewsdirect.com