The difficulty experienced by the Central Bank of Nigeria (CBN) in mopping up excess liquidity in the banking system may worsen this week on the back of maturing N978.3 billion Asset Management Corporation of Nigeria’s (AMCON) bonds, scheduled for October 31, 2014, analysts have said.
Last week, the CBN’s attempt to mop up liquidity seemed futile, as its Open Market Operation (OMO) instruments were shunned by deposit money banks (DMBs). Notably, the OMO auction held on Friday witnessed no subscription.
According to Afrinvest, the poor subscription rate mislead can majorly be attributed to the weakening FPI demand for the domestic paper spurred by caution with the macroeconomic conditions.
“We anticipate this difficulty in mopping up liquidity will be underscored by the maturing N978.3 billion AMCON bonds scheduled for 31st of October 2014”, analysts at Afrinvest said.
The interbank money market began the week with liquidity moderations as banks made provisions for CRR maintenance by the CBN. Hence, interbank rates rose on Wednesday by average 14bps to 12.3%, with benchmark call and OBB rates rising 11bps and 21bps to 11.8% and 10.5%, respectively.
The DMO also offered N131.8 billion in Treasury Bills, while N64.9 billion was sold. The inflow of NTB maturities worth N131.8 billion on Thursday had mild effect on liquidity levels as this was offset by DMB’s provision for the Monday’s RDAS auction while the CBN also mopped up N27.9 billion.
his week, treasury bills worth N218.70 billion are expected to mature via Open Market Operations on Thursday, October 16; viz: 108-day bills worth N90.04 billion and 133-day bills worth N128.65 billion.
“We expect the maturities to boost liquidity in the financial system with a resultant decline in interbank rates”, analysts at Cowry Assets Management Limited said.
