CBN WITHDRAWS N1.3 TRILLION FROM BANKING SYSTEM IN SEPTEMBER TO TIGHTEN LIQUIDITY
The Central Bank of Nigeria (CBN) withdrew N1.3 trillion from the banking system in September 2024 through Nigerian Treasury Bills (NTB) and Open Market Operations (OMO) auctions, according to a report by Afrinvest Research.
The report indicates that liquidity in the financial system was initially bolstered by N903.4 billion from the Federation Account Allocation Committee. However, this influx was largely countered by the CBN’s measures, which included N622.7 billion from NTB sales and N712.5 billion from OMO issuances, effectively tightening liquidity conditions.
To further manage liquidity, the CBN raised its Monetary Policy Rate and Cash Reserve Ratio to 27.25% and 50%, respectively. These adjustments are aimed at constraining interbank lending by keeping a portion of bank deposits with the central bank. Despite these measures, system liquidity improved to N253.6 billion by the end of the month, recovering from a negative position in August.
The CBN’s actions significantly impacted the money market, with the overnight policy rate and open buyback rates surging by 9.9 and 8.7 percentage points month-on-month, closing at 28.0% and 28.7%, respectively. Afrinvest attributed this rise to increased demand for interbank funds amid tightening monetary conditions.
In September, the CBN conducted three rounds of NTB auctions and two rounds of OMO auctions to manage liquidity effectively. Yields on NTBs saw a decrease, with the 91, 182, and 364-day tenors falling to 17.0%, 17.5%, and 20.0%, respectively, reflecting strong investor demand for longer-tenor bills despite ongoing inflation concerns.
Looking forward, Afrinvest analysts predict a liquidity boost from upcoming NTB and OMO maturities, estimated at N160.5 billion and N325.1 billion, respectively. They expect the CBN to maintain its liquidity management strategy through active NTB auctions while anticipating a bullish trend in the secondary T-bills market driven by sustained demand.
The Central Bank of Nigeria (CBN) withdrew N1.3 trillion from the banking system in September 2024 through Nigerian Treasury Bills (NTB) and Open Market Operations (OMO) auctions, according to a report by Afrinvest Research.
The report indicates that liquidity in the financial system was initially bolstered by N903.4 billion from the Federation Account Allocation Committee. However, this influx was largely countered by the CBN’s measures, which included N622.7 billion from NTB sales and N712.5 billion from OMO issuances, effectively tightening liquidity conditions.
To further manage liquidity, the CBN raised its Monetary Policy Rate and Cash Reserve Ratio to 27.25% and 50%, respectively. These adjustments are aimed at constraining interbank lending by keeping a portion of bank deposits with the central bank. Despite these measures, system liquidity improved to N253.6 billion by the end of the month, recovering from a negative position in August.
The CBN’s actions significantly impacted the money market, with the overnight policy rate and open buyback rates surging by 9.9 and 8.7 percentage points month-on-month, closing at 28.0% and 28.7%, respectively. Afrinvest attributed this rise to increased demand for interbank funds amid tightening monetary conditions.
In September, the CBN conducted three rounds of NTB auctions and two rounds of OMO auctions to manage liquidity effectively. Yields on NTBs saw a decrease, with the 91, 182, and 364-day tenors falling to 17.0%, 17.5%, and 20.0%, respectively, reflecting strong investor demand for longer-tenor bills despite ongoing inflation concerns.
Looking forward, Afrinvest analysts predict a liquidity boost from upcoming NTB and OMO maturities, estimated at N160.5 billion and N325.1 billion, respectively. They expect the CBN to maintain its liquidity management strategy through active NTB auctions while anticipating a bullish trend in the secondary T-bills market driven by sustained demand.