OMO Bill Auction Settlement Gulps Financial System Liquidity
The financial system liquidity has been plunged into negative following a huge OMO bills auction settlement, and absence of significant inflows to weather the storm.
The Central Bank of Nigeria (CBN) successfully mopped up excess liquidity in the money market after it sold N2.64 trillion OMO bills to deposit money banks, and foreign portfolio investors on Tuesday.
The liquidity strain triggered an increase in funding costs, and open repo and overnight lending rate jerked up. The market also witnessed a Treasury bill auction on Wednesday where the authority raised N1.06 trillion against N1.15 trillion offer size. Hence, the market anticipates liquidity condition in the financial system to tighten further in the absence of supporting inflows.
Details showed that system liquidity opened the day on a deficit balance of -N973.90 billion – first in the year, down by N4.74 trillion from a previous surplus N3.77 trillion.
Analysts at AIICO Capital Limited said in its investors note that the sharp drop was driven by N2.64 trillion OMO sales and N400.00 million borrowings at the SLF window.
These outflow offset N1.48 trillion placements at the CBN’s Standing Deposit Facility (SDF) window by some commercial banks. The market also recorded N91.34 billion coupon inflow from Jan-2042 bond.
At the close of business on Wednesday, the average funding cost in the money market rose by 4bps to 22.65%. FMDQ data showed that the Open Repo Rate (OPR) held steady at 22.50%, while the Overnight Rate (OVN) rose sharply by 9bps to 22.80%.
Investment firm AIICO Capital Limited expects funding cost to ease amid an expected inflow of N1.20 trillion from 22- Jan-2026 bond maturity and N725.19 billion Nigerian Treasury bills maturity, offsetting midweek auction settlement. Nigeria’s World Cup Hopes End with 1-1 Draw in South Africa
