CBN Braces for N8.57tn Liquidity Surge as OMO Bills Mature
By Aboki Forex —
Nigeria's banking system could see liquidity climb to about N8.57tn this week as Open Market Operations bills mature and bond coupon payments hit bank accounts. Roughly N2.59tn is expected to flow into the financial system from the two sources, on top of the heavy cash pile banks are already sitting on.
Central Bank of Nigeria data showed system liquidity rose to N5.98tn in the week ended 25 September, up from N2.86tn the week before. The jump followed the repayment of about N2.3tn in OMO bills on 22 September.
Fresh inflows this week
Another N2.43tn in OMO bills are due to mature this week, while bond coupon payments could add about N164bn. If banks hold most of those funds in the system rather than lending them out, total liquidity could reach around N8.57tn.
The excess cash is already visible. Banks placed more than N7tn with the CBN's Standing Deposit Facility in the past week, a sign they had little use for the money elsewhere. That build-up could push the apex bank to mop up more cash through fresh OMO sales.
Rate cut changes the maths
The inflows landed shortly after the CBN cut its Monetary Policy Rate from 26.5 per cent to 23 per cent. The 350-basis-point reduction was announced after the Monetary Policy Committee meeting on 22 September.
Money-market rates fell in response. The overnight rate dropped to 20.77 per cent from 22.24 per cent, while the funding rate fell to 20.40 per cent from 22 per cent. The CBN also lowered the Standing Deposit Facility rate to 20 per cent and set the Standing Lending Facility at 23.50 per cent.
Average Nigerian Treasury bills yield dropped 90 basis points to 17.89 per cent. At the latest auction, the Debt Management Office offered N500bn worth of Treasury bills but received bids worth N4.2tn. Stop rates fell to 15.50 per cent for the 91-day bill, 15.80 per cent for the 182-day bill and 15.89 per cent for the 364-day bill.
The CBN held an OMO auction on 24 September, offering N1tn in bills. Investors submitted bids worth N6.1tn, and the CBN allotted N2.3tn.
What it means for markets
The liquidity build-up will test the CBN's new lower-rate stance. Banks are set to receive another large inflow this week, and the apex bank may respond with more OMO sales to keep cash levels in check. For businesses and consumers watching borrowing costs, the direction of those auctions will matter more than the rate cut itself.