CBN Mops Up N4.3bn With OMO Intervention

The Central Bank of Nigeria (CBN) has disclosed excess liquidity permeated the banking system reasonably well in 2015.

In its half year activity report in Financial Markets Department it made available on its website at the weekend, the apex bank noted liquidity was influenced by fiscal injections through Statutory Revenue Allocations (SRA), Value Added Tax (VAT), budget augmentation, Subsidy Reinvestment and Empowerment Programme (Sure-P), amongst others.

Other forms of injections included payments for Joint Venture Cash (JVC) calls to oil partners and the repayment of matured government securities to investors. 

To moderate the liquidity overhang, however, CBN said it intervened through Open Market Operations at various intervals. 

The report showed that 47 auctions were conducted using CBN Bills with tenors ranging from 91 to 301 days, which resulted in the aggregate mop-up of N4, 261.72 billion compared to N4, 484.93 billion in the first half of 2014.

It explained that withdrawal of liquidity from the system were through the NNPC transfer of funds to the Federation Account at the CBN for disbursement to the federating units, sale of foreign exchange and Federal Government of Nigerian (FGN) debt instruments to the public. 

Other instruments used for liquidity management included the cash reserve ratio (CRR) which had 20 per cent for private sector deposits and 75.00 per cent on public sector deposits till May 19, 2015 when the Monetary Policy Committee (MPC) harmonised it at 31.00 per cent for both sector deposits.

In addition, the maintenance period was adjusted to weekly from bi-weekly. The MPR remained at 13.00 per cent with, the symmetric corridor of -/+ 200 basis points.

To aid short-term liquidity management by the deposit money banks.

(DMBs), CBN said that Intraday Liquidity Facility (ILF) was accessible as a temporary credit to meet shortfalls, and repayable before close of business. “ILF that were not repaid were converted to overnight Standing Lending Facility (SLF). The SLF and the Standing Deposit Facility (SDF) were also available for players to square up their positions at the close of business, with the applicable rates anchored on the MPR,” the report stated. 

CBN noted that requests for the SDF were more predominant in the review period than the SLF despite the N7.5 billion limits placed on SDF for remuneration, as this reflected the level of liquidity surfeit in the system.

Meanwhile, the CBN’s half-year report showed that repurchase transactions on OMO for the period under review amounted to N54.38 billion and the interest earned was N441.38 million with rates ranging from 16.00 to 16.50 percent.

The report also added that the requests for SLF were granted to banks and discount houses that were in need of funds to square off their negative positions at the end of each business day. Daily average overnight lending between January and June 2015 amounted to N29.41billion, reflecting the liquidity position during the period.

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