The International Monetary Fund (IMF) recommends that the CBN raise Open Market Operations (OMO) bills by up to N2 trillion over the next year to reduce excess liquidity in the economy.
“Continue withdrawing excess liquidity using short-term instruments (OMOs or repos). The initial aim should be to extract the remaining 800 billion naira in excess reserves, and up to naira 2 trillion over the next 12 months,” IMF said.
This was said in the Fund’s Post Financing Assessment Discussion and Staff Report of Nigeria published by the IMF.
This advice comes as Nigeria grapples with rising inflation, which has reached 28.92 percent in December.
The report advised that the CBN should maintain a monetary tightening to cool inflation.
Last week the CBN recorded an oversubscription of N2.3 trillion for its N1 trillion treasury bills offer.
The one year treasury bill was oversubscribed to the tune of N1.8 trillion at a stop rate of 19 percent and yield of 23.43 percent.
Also, IMF noted that Nigeria can meet its debt obligation requirements even though some risk persists. Specifically, it mentioned that such risk including inflation-triggered depreciation of the naira or a climate shock all have potentials to weaken the payment indicators.
The IMF estimated that inflation might slow in the first quarter of 2024, reaching about 17 percent by the year’s end.
However, food inflation will remain high for the most part of the year till the last quarter with the depreciation of the naira primed as the major cause.
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