CBN Mops Up Excess N4.3billion with Open Market Operations Intervention

The Central Bank of Nigeria, CBN, has stated excess liquidity permeated the banking system reasonably well in 2015.

In its half year activity report in Financial Markets Department it made available on its website at the weekend, the CBN stated liquidity was influenced by fiscal injections through Statutory Revenue Allocations (SRA), Value Added Tax (VAT), budget augmentation, Subsidy Reinvestment and Empowerment Programme (Sure-P), amongst others.

Other forms of injections included payments for Joint Venture Cash (JVC) calls to oil partners and the repayment of matured government securities to investors.

To moderate the liquidity overhang, however, CBN said it intervened through Open Market Operations at various intervals.

The report showed that 47 auctions were conducted using CBN Bills with tenors ranging from 91 to 301 days, which resulted in the aggregate mop-up of N4, 261.72 billion compared to N4, 484.93 billion in the first half of 2014.

It explained that withdrawal of liquidity from the system were through the NNPC transfer of funds to the Federation Account at the CBN for disbursement to the federating units, sale of foreign exchange and Federal Government of Nigerian (FGN) debt instruments to the public.

Other instruments used for liquidity management included the cash reserve ratio (CRR) which had 20 per cent for private sector deposits and 75.00 per cent on public sector deposits till May 19, 2015 when the Monetary Policy Committee (MPC) harmonised it at 31.00 per cent for both sector deposits.

In addition, the maintenance period was adjusted to weekly from bi-weekly. The MPR remained at 13.00 per cent with, the symmetric corridor of -/+ 200 basis points.

To aid short-term liquidity management by the deposit money banks.