CBN to step up liquidity mop up as ₦333.83 bln flows into interbank

The Nigeria’s Central Bank will this week step up its liquidity mop-up in a bid to offset impact of ₦333 billion inflows into the interbank money market.

Already, the apex bank is scheduled to mop-up ₦174.15 billion this Wednesday through Open Market Operation (OMO) treasury bills (bills) auction.

The auction comprises 91-day bills worth ₦39.01 billion, 182-day bills worth ₦48.45 billion and 364-day bills worth ₦86.69 billion.

The inflow of ₦333.83 billion scheduled to hit the interbank money market on Thursday comprises maturing bills including 91-day bills worth ₦39.01 billion, 182-day bills worth ₦48.45 billion, 356-day bills worth ₦159.68 billion and 364-day bills worth ₦86.69.

Last week, the CBN mopped up ₦156 billion on Thursday to checkmate inflow of ₦156 billion from matured bills.

The liquidity mop up, in addition to funds outflow for Naira back-up in the USdollar auctions by the CBN, triggered sharp increase in cost of funds, with average short term interbank cost of funds rising by 221.7 basis points (bpts) week-on-week (w-o-w).

Data from the Financial Market Dealers Quote (FMDQ) showed that interest rate on Collateralised lending (Open Buy Back, OBB) rose by 218 bpts to 29.17 per cent last week from 7.33 per cent the previous week.

Similarly, interest rate on Overnight lending rose by 225 bpts to 30.92 per cent last week from 8.42 per cent the previous week.

Analysts however projected moderation in cost of funds this week, based on expected positive net inflow into the interbank money market notwithstanding liquidity mop-up activities of the apex bank.

According to analysts at Lagos based, Vetiva Capital Asset Management Limited: “Amidst sustained OMO auctions from the CBN, we expect a mixed trading sentiment to dominate the T-bills market at week open. However, we foresee more cautious trading towards the mid-week amidst the anticipated ₦174.15 billion T-bills primary market auction slated for Wednesday. That said, we believe improvement in system liquidity via ₦160 billion OMO maturities, by Thursday will eventually support demand in the fixed income market at the latter part of the week.”

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