Nigeria: CBN Cuts Treasury Bills Sale By 62% to N7.77trn

The Central Bank of Nigeria sold N7.77 trillion worth of secondary market (Open Market Operations) treasury bills in 2020, down by 62 percent from N13.92 trillion sold in 2019.

Secondary market (Open Market Operations, OMO) treasury bill is one of the instruments used by the CBN to control money supply in the economy. When the CBN wants to reduce money supply, it sells OMO treasury bills (TBs) and when it wants to increase money it sells OMO TBs.

The sharp decline in OMO TB sales in 2020 reflects the impact of the apex bank’s decision to exclude local investors, individuals and corporates from investing in OMO bills.

The ban, which came into effect on October 23rd 2019, was introduced to forestall banks from using OMO TBs to circumvent the 60 percent minimum Loan to Deposit Ratio (LDR) directive of the CBN.

Thus, the apex bank restricted investments in OMO TBs to banks and foreign portfolio investors.

This resulted in a steady decline in the OMO TBs sold by the apex bank in the first three quarters of the year.

Financial Vanguard analysis showed that the CBN sold N4.4 trillion worth of OMO TBs in the first quarter of 2020 (Q1’20), up by 18 percent from N3.77 trillion sold in Q4’19, while it repaid N6.13 trillion worth of matured bills, translating to net liquidity injection of N2.36 trillion.

But the CBN reduced the amount of TBs sold in Q2’20 by 54 percent Q2’20 to N2 trillion, while it repaid N5.52 trillion worth of matured bills, translating to net liquidity injection of N3.52 trillion.

The CBN further reduced OMO TB sales in Q3’20 by 69 percent to N625.13 billion while it repaid N3.3 trillion worth of matured bills, translating to net liquidity injection N2.67 trillion.

The apex bank however increased OMO TBs sales in Q4’20 slightly by 12 percent to N700 billion, while it repaid N3.53 trillion worth of matured bills, translating to net liquidity injection N2.83 trillion during the quarter.

Source:

Leave a Reply

Your email address will not be published. Required fields are marked *