Liquidity management cost N2.1trn in 2018 – CBN

Motolani Oseni

The Central Bank of Nigeria (CBN) has disclosed that it sent a total of N2.114 trillion to manage liquidity in the economy over the 12 months of 2018, representing 42.01per cent increase over N1.488trillio in 2017.

This was stated in the 2018 Annual Activity Report of the Apex bank, where it explained that total bills offered at the Open Market Operation (OMO) auctions increased to N34.61 trillion;

of which N24.916 trillion subscribed, while N22.35 trillion was and sold; compared with N13.762 trillion; N12.344 trillion; and N11.346 trillion, respectively, in 2017.

The report further stated 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.

However, the total request for repurchase transactions for the period under review fell by 12.65 per cent to N966.06 billion from N1.105 trillion in the prior year, with the applicable interest rates ranging from 18.50 to 19.50per cent for the 4- to 90-day tenors, same as in the preceding year.

Total interest earned on repo fell by 27.87per cent to N23.55 billionn, from N32.65 billion in 2017, a situation the apex bank blamed on increased net liquidity in the system.

Within the period under review, the CBN said banks were less frequent at the Standing Lending Facility (SLF) than in 2017, due to increased net system liquidity.

The remunerable the threshold for daily deposits per institution at the Standing Deposit Facility (SDF), where they deposited excess funds at the end of each business day to square-up their positions remained N7.5 billion.

This, the report stressed, “was to curtail unbridled requests by market participants and encourage lending to the real economy,” even as applicable rates which were anchored on the benchmark Monetary Policy Rate (MPR) for the SLF and SDF also remained 16.00 and 9.00 per cent respectively, the same as in 2017.

On the SDF window, patronage increased to an average daily amount of N84.27 billionn for the 246 transaction days in 2018, up from N41.9 billion for the 230 transaction days in 2017.

Also, average daily interest payments on the deposits increased to N30.51 million in the review period, from N14.86 million in 2017, with the increased transaction volume due to higher levels of banking system liquidity.

The value of inter-bank funds market transactions dropped by 94.95 per cent to N1.661 trillion in 2018, from N32.91 trillion in 2017, with Open Buy Back (OBB) transactions accounting for 96.35 per cent, while transactions at the unsecured the r-bank segment accounted for the balance of 3.65 per cent, compared with 94.83 and 5.17 per cent, respectively in 2017.

A breakdown of the transactions showed an appreciable decline in call placements by 96.22 per cent to N60.70 billion, from N1.603 trillion in 2017; just as transactions at the OBB segment decreased substantially, by 94.87 per cent to N1.601 trillion, from N31.207 trillion in 2017.