CBN issued N13.762tr OMO instruments to check inflation in 2017

Central Bank of Nigeria’s (CBN) governor Godwin Emefiele

By Mathias Okwe (Abuja)
* Liquidity management cost grows to N1.488 trillion
To contain inflation induced by excess liquidity in the system in 2017, the Central Bank of Nigeria (CBN) last year deployed Open Market Operation (OMO) instruments worth over N13.762 trillion

The apex bank in its 2017 last half activity report just released, said Nigerian Treasury Bills (NTBs) complemented these fiscal injections. In order to mop up the excess liquidity, OMO auctions were conducted frequently, pointing out  however, that  the frequency of auctions abated in November and December in response to various developments in the financial markets.

According to the report: “Total CBN bills offered at the OMO was N13,762.94 billion, while public subscription and sale amounted to N12,344.90 billion and N11,346.48 billion, respectively, compared with N6,726.67 billion, N10,294.41 billion and N7, 859.62 billion offered, subscribed and sold, respectively, in 2016.”It explained that the high level of activity during the review period was attributable to the increased number of auctions to moderate the excess banking system liquidity, occasioned by the payments of statutory revenue to the three tiers of government, other fiscal disbursements and maturing CBN Bills, amongst others.

“Consequently, the cost of liquidity management in 2017 increased to N1, 488.68 billion, from N922. 31 billion in 2016.” the report further revealed.The report further added that liquidity management was conducted through the use of OMO as the main instrument of monetary policy, complemented by discount window activities, CRR and interventions in the foreign exchange market. The challenge of curtailing inflation, promoting increased capital inflows and restoring the economy to the  path of growth was paramount in the bank’s policy mix.
In continuation of the contradictory monetary policy stance, the thresholds of the monetary policy instruments were maintained at their end-2016 levels. Consequently, the MPR was  retained at 14.0 per cent, with an asymmetric corridor of +200/-500 basis points for the Standing Lending Facility (SLF) and Standing Deposit Facility (SDF), respectively. In addition, the CRR and Liquidity ratios remained 22.50 and 30.00 per cent, respectively.
It explained that the liquidity levels in the banking system were influenced by periodic fiscal injections, comprising (Statutory Revenue Allocation (SRA), Value Added Tax (VAT), non-oil revenue and the refund of the Paris Club deductions, amongst others). Maturing CBN bills and the redemption of FGN Bonds and Nigerian Treasury Bills (NTBs) complemented these fiscal injections.
It added that in  order to mop up the excess liquidity, OMO auctions were conducted frequently. However, the frequency of auctions abated in November and December in response to various developments in the financial markets.
The report also said Tenored repo, SLF and SDF were available for market participants to square up their positions or invest excess funds at the close of business. Similarly, Intra-day Liquidity Facility (ILF) was accessible as temporary credit to the banks to meet their funding needs within the operating hours of the CBN Inter-bank Funds Transfer System (CIFTS).