Financial System Liquidity Plunges after CBN Raised N3.9trn
The financial system liquidity plunged sharply following aggressive liquidity mop-up activities of the Apex Bank in the money market, raising about N3.9 trillion from OMO and Treasury bills subscriptions.
Early in the week, the liquidity conditions surpassed N4 trillion mark as banks were having fun at the Central Bank of Nigeria (CBN) standing deposit facility window, where they earn 22.5% on sterilised funds.
The liquidity level in the financial system was significantly affected after OMO and Nigerian Treasury Bills auctions—the monetary authority’s way of limiting banks’ capacity to create credits.
Activities at the standing lending facility have been subdued, but some borrowing actions were witnessed midweek after N2.7 trillion OMO bills settlement gagged the financial system.
With rates adjusting to the market dynamics, interbank system liquidity moderated to a net long position of N1.20 trillion on Thursday, compared to N1.65 trillion recorded the previous day. .
Details from the CBN auction results revealed that about N3.9 trillion was mopped up from the financial markets in two days. The intermarket liquidity was drained following N1.14 trillion settlement for Treasury bills sold to investors, which outweighed N514.25 billion inflow from expired bills.
The matured treasury bills repayment, alongside an N1.85 trillion increase Nigerian banks placements at the CBN deposit facility window to were insufficient to offset the liquidity outflow from the settlement
At the close of business on Thursday, the average funding cost eased by 4bps to 22.61%. The open repo Rate (OPR) remained at 22.50% while the overnight rate shed 8bps to close at 22.71%.
The secondary market for Treasury bills was relatively quiet with a mild bearish tilt as average benchmark yield expanded by +7bps to close at 17.72%. Similar sentiment was evident in the OMO market as average benchmark yield expanded by +10bps to close at 21.11% Naira Rallies Ease Corporate Foreign Payments Burden
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