CBN’s liquidity mop-up faces fresh N2.45tn inflows

The Central Bank of Nigeria’s aggressive liquidity withdrawal is facing another test, with N2.45tn expected to flow into the banking system this week, largely from maturing Open Market Operations securities.

The projected inflows come after the apex bank allotted N5.667tn through two OMO auctions within six days, underscoring the scale of its efforts to contain excess cash in the financial system.

The CBN on Tuesday offered another N1.5tn in OMO bills, comprising N500bn each in 154-day, 252-day and 329-day instruments.

The fresh offer represents its third OMO auction between 3 November and 10 November, as banking system liquidity continues to rise despite the recent interventions.

Banking system liquidity stood at N8.505tn at the close of trading on Friday, 6 November, up from N7.373tn a week earlier, representing a 15.36 per cent increase.

According to the Financial Market Dealers Association’s weekly market report published on Monday, 9 November, projected inflows into the banking system this week amount to N2.448tn.

OMO maturities will account for N2.298tn, representing 93.9 per cent of the expected inflows and a 13.99 per cent increase from the N2.016tn recorded in the preceding week.

Treasury bills maturities are expected to contribute N148.565bn, while corporate bond coupon payments will add another N1.707bn.

Although the projected inflows are 6.21 per cent below the N2.610tn estimated for the previous week, their concentration in OMO maturities presents another liquidity management challenge for the CBN.

The apex bank’s recent operations have, however, begun to reduce the amount of excess funds deposited by financial institutions at its Standing Deposit Facility.

CBN data showed that banks’ deposits at the facility declined to N5.915tn on 9 November from N8.311tn on 6 November, following OMO settlements.

The reduction indicates that some funds previously parked at the apex bank have been absorbed through its liquidity management operations.

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At its 3 November auction, the CBN offered N1.5tn but received subscriptions worth N3.52tn and allotted N2.95tn.

Stop rates stood at 17.77 per cent, 17.71 per cent and 17.67 per cent across the 119-day, 126-day and 133-day instruments, respectively.

At the 6 November auction, investors submitted bids worth N5.74tn against another N1.5tn offer, prompting the apex bank to allot N2.72tn.

Stop rates were 17.25 per cent for the 179-day instrument, 16.54 per cent for the 270-day bill and 15.74 per cent for the 361-day security.

The combined N5.667tn allotment was equivalent to about 91.7 per cent of the N6.182tn allotted throughout October.

Meanwhile, the Debt Management Office has maintained a more conservative approach to borrowing through T-bills auctions, allotting significantly less than investors offered.

At its 4 November auction, the DMO allotted N509.401bn against an offer of N800bn, despite receiving subscriptions worth N2.045tn.

The allotment represented about 24.9 per cent of total subscriptions.

The DMO offered another N800bn in T-bills on Tuesday, comprising N100bn each in 91-day and 182-day instruments and N600bn in 364-day bills.

The auction will settle on November 12, the same day N148.565bn in treasury bills maturities are expected to enter the banking system.

The combination of fresh OMO maturities and treasury bills inflows means the CBN may need to sustain its sterilisation operations to prevent excess liquidity from rebuilding in the banking system.