CBN may mop-up N230bn from money market this week

As part of continued effort in ensuring system stability in the country, indications are rife that the Central Bank of Nigeria (CBN), may dry up to N230 billion from the money market this werek.

This is because there Open Market operations (OMO) operations that are due to mature this week, and financial analysts believed that N62 billion worth of treasury bills would mature this week, but the apex bank has decided to roll them over.

An Open Market Operation (OMO) is an operation by a central bank to mop up liquidity from a group of banks. However, analysts opined that fresh treasury bills worth the same amount will be issued.

They note that the CBN is embarking on this to manage the level of liquidity in the system. The apex bank believes that leaving liquidity (funds) in the hands of the bank will lead to speculation in the foreign exchange market.

Explaining that if the CBN decides to mop up the funds, it could lead to an increase in inter-bank rates; and if the inter -bank rates remain high, interest rate to the public will also remain elevated.

Meanwhile, continued fund raising by the CBN and thus indirectly the Federal Government has left the private sector crowded out of the market, and having to borrow at high interest rates.

The latest FMDQ OTC market turnover report has showed that turnover on all products traded on the FMDQ secondary, excluding primary market auctions in Treasury Bills, Bonds and Foreign Exchange accounted for the new figure.

According to the FMDQ half year report, foreign exchange derivatives stood at N7.930 trillion ($25,365,000,000) between January to June this year, while Treasury Bills accounted for N31.309 trillion ($100,348,000,000).

Also, FGN Bonds Turnover from January to June 2017, stabilsed at N5.353billion ($17,169,000,000) but recorded N1.631 billion ($5 million) on Other Bonds in the second quarter of this year.

The data, extracted from the report indicated that Eurobonds made during the quarter under review was N51.347 billion ($164 million), while Repurchase Agreements/Buy-Backs steadied at N15.734 trillion ($50.468billion) during the period.

Motolani Oseni