The Central Bank of Nigeria, CBN, absorbed ₦1.3 trillion from the financial system.
This was done through Treasury Bills and Open Market Operations.
The move tightened liquidity despite earlier inflows.
In September, the Central Bank of Nigeria made a bold move to control liquidity by absorbing ₦1.3 trillion from the financial system.
According to a report by Afrinvest Research, the CBN used a combination of Nigerian Treasury Bills (NTB).
It also employed Open Market Operations (OMO) auctions to achieve this.
At the beginning of the month, the Federation Account Allocation Committee flooded the system with ₦903.4 billion.
But the CBN’s actions soon reversed this inflow.
The bank sold ₦622.7 billion in NTBs and issued ₦712.5 billion in OMOs, effectively tightening liquidity in the market.
To further strengthen its grip on liquidity, the CBN raised its Monetary Policy Rate to 27.25% and hiked the Cash Reserve Ratio to 50%.
These moves made it harder for banks to lend money because the central bank now held a significant portion of their deposits.
Impact on the Market
Despite these efforts, liquidity in the system recovered slightly, closing at ₦253.6 billion by the end of the month.
Read Also; Nigeria At 64: How FG Cleared ₦30 Trillion CBN Ways And Means Loan
However, the CBN’s measures did not go unnoticed in the money market.
Rates surged, with the overnight policy rate rising by 9.9 percentage points and the open buyback rate jumping 8.7 percentage points.
Afrinvest noted that these changes were due to increased demand for interbank funds.
Throughout September, the CBN conducted three NTB auctions and two OMO auctions to maintain control over the market.
Investor interest in longer-tenor bills remained high, driven by inflation concerns.
As October began, analysts anticipated a boost in liquidity with NTB and OMO maturities of ₦160.5 billion and ₦325.1 billion, respectively.
They expect the CBN to continue its active management of liquidity through further NTB auctions.
The secondary market for Treasury bills may stay strong due to persistent demand.
