Cost of banks’ borrowing high after N400bn OMO by CBN

Interbank overnight rate rose to 11.25 percent on Friday, higher than 6.92 percent as of January 25, 2017, after the Central Bank of Nigeria (CBN) mopped up N400 billion in the system using Open Market Operation (OMO).
The Open Buy-Back increased from 6.50 percent as of January 25, to 10.50 percent on Friday last week, according to data from the FMDQ.
The apex bank sold about N400 billion ($1.27bn) Treasury bills on Friday, which pushed up the overnight interbank lending rate and the OBB on Friday last week.
The CBN sold N82 billion in 181-day Treasury bills at 18 percent and N309 billion at 18.6 percent, mopping up liquidity from the money market and pushing up the cost of borrowing among deposit money banks.
The money markets had opened on Thursday with a surplus liquidity of about N467 billion due to an injection of matured Treasury bills until the central bank later debited banks for the purchases of N302.4 billion in primary market Treasury bills.
The CBN raised N302.4 billion at Wednesday’s Treasury bills auction, more than the N242 billion planned due to strong demand for the one-year debt, while payment for the purchased was debited from commercial lenders’ accounts on Friday.
The nation’s currency on Friday fell to a record low of N500 per US dollar as a result of supply shortage. It traded stable at the interbank spot market closing at N305.25k against the dollar, data from the FMDQ show.
“The growing reserves and less expenditure on import of rice, the global decline of dollar value will help in naira stability,” Aminu Gwadabe, acting president, Association of Bureau De Change Operators of Nigeria (ABCON), told BusinessDay.
Godwin Emefiele, governor of CBN, said after the first Monetary Policy Committee (MPC) meeting in the year that Nigeria’s foreign reserves stood at $28.9 billion as of Tuesday, January 24, driven by oil prices increase and relative stability in the Niger Delta.