The total bills offered by the Central Bank of Nigeria (CBN) at the Open Market Operations (OMO) auctions was N21,501.14 billion between January and December 2019.
This was contained in the bank’s 2019 Annual Activity Report released by the Financial Markets Department, CBN, and posted on its website on Friday, November 6.
The apex bank said the public subscription and sale of its amounted to N27,373.11 billion and N20,723.62 billion, respectively, compared to N34,610.06 billion, N24,916.29 billion and N22,350.16 billion offered, subscribed and sold, respectively, in 2018.
According to the central bank, notwithstanding the moderation in the frequency of OMO auctions in 2019, the singular surge in capital inflows following the successful conduct of the presidential election in February 2019 necessitated issuance of OMO Bills to cover the inflows.
The resultant effect was an overall increase in the cost of liquidity management in 2019, by 11.78 per cent to N2,363.09 billion, from N2,114.04 billion in 2018.
Open Market Operations (OMO) remained the main tool for liquidity management complemented by discount window activities, Cash Reserve Requirement (CRR) and interventions in the foreign exchange market.
The challenges of curtailing inflation, promoting increased capital inflow and restoring the economy to the path of growth were paramount in the Bank’s policy mix.
In view of the Bank’s monetary policy stance, the Monetary Policy Rate (MPR) was reviewed downwards from 14.00 per cent to 13.50 per cent in March 2019.
The asymmetric corridor of +200/-500 basis points for the Standing Lending Facility (SLF) and Standing Deposit Facility (SDF) was retained, and the CRR and Liquidity Ratio remained 22.50 per cent and 30.00 per cent, respectively.
The banking system liquidity was influenced by maturing CBN Bills and interest payments, periodic fiscal injections (comprising Statutory Revenue Allocation (SRA), and Value Added Tax (VAT) among others.
The redemption of FGN Bonds, NTBs and Promissory notes also contributed to the injections.
In line with the Bank’s non-expansionary monetary policy stance occasioned by the need to contain inflation and maintain price stability, OMO bills were utilized as the main instrument for liquidity management.
Fiscal injections, especially statutory allocations to state and local governments, as well as maturities from monetary operations continued to be major drivers of excess liquidity in the banking system.
Though there was the need for OMO auctions to moderate liquidity in the banking system, the frequency of the auctions reduced in the second half of the year for greater efficiency in liquidity management.