Banks’ Placement at CBN Window Falls by 40% Amidst OMO Actions
Deposit money banks’ (DMBs) placements at the Central Bank of Nigeria (CBN) Standing Deposit Facility (SDF) window declined by 40% week on week while system liquidity crashed.
System liquidity reduced sharply as the monetary authority stepped up its open market operations, with huge OMO bills offer sizes across two primary market auctions.
The CBN was active in the money market last week, selling OMO and Nigerian Treasury bills to investors to mop up excess funds and replace expired short-term securities.
The related auction outflows reduce the excess liquidity, though financial system remained robust with N1.31 trillion surplus balance as of Friday’s close.
DMBs with low appetite for lending have been placing excess funds into SDF window at 24.50% since monetary policy asymmetric corridor adjustment in Sept.
Compared with alternative investment securities options, analysts said the SDF rate is currently above the Nigerian Treasury bills return. System liquidity opened the week at a peak of N3.9 trillion, driven by increased DMB placements at the SDF window.
As trading progressed, an additional N2.09 trillion in FAAC inflows provided fresh support, complemented by treasury bills and OMO maturities. However, this liquidity expansion was partly neutralised by a series of sterilisation auctions designed to absorb excess cash.
The CBN conducted a sizable N3 trillion OMO auction, which outweighed the N1.4 trillion OMO repayments. Then, net Treasury bills settlements of N400.47 billion weighed on system balances.
To replace matured Treasury bills, the CBN allotted N1.1 trillion in Treasury bills across standard tenors to investors on Wednesday.
By the close of the week, the liquidity position had narrowed significantly to a net positive of N1.31 trillion, representing a sharp 78.8% contraction from the previous week’s N6.17 trillion, according to Cowry Asset Limited. .
Analysts at Cowry Asset Limited said the moderation reflected banks’ growing preference to warehouse excess funds with the Central Bank, a trend that continues to influence funding market behaviour.
Hence, Nigerian banks’ placements averaged N2.51 trillion, down by 40% from N4.17 trillion the prior week, according to TrustBanc Financial Group Limited. # Banks’ Placement at CBN Window Falls by 40% Amidst OMO Actions GTCO Slides Amidst Multiple Block Transactions
