CBN to mop-up N238bn as NBS releases June inflation data

CBN to mop-up N238bn as NBS releases June inflation data



The Central Bank of Nigeria (CBN) will this week continue its tight monetary policy by issuing treasury bills to mop-up N238 billion.

Meanwhile the National Bureau of Statistics (NBS) will also this week release the inflation data for June, which is expected to sustain the downward trend for the fourth consecutive months.

Investigations revealed that the CBN, in a bid to forestall build-up of excess liquidity in the interbank money market, which could lead to upward pressure on inflation and exchange rate, will issue treasury bills worth N238.7 billion.

This comprises 91-day bills worth N12.295 billion, 364-day bills worth N129 billion and 353-day bills worth N97.438 billion.

It was designed to cancel out the impact of inflow of N204.96 billion coming into the system this week via payment of matured treasury bills.

The mature treasury bills comprise  91-day bills worth N36.786 billion,  182-day bills worth N39.175 billion and 364-day bills worth N129 billion.

Last week the interbank money market experienced wide swings in cost of funds, with average short term interest rate rising above 25 per cent at the beginning of the week, due to liquidity outflow for participation in CBN’s dollar auctions, before falling to single digit level at the close of the week, due to liquidity inflow of N89.9 billion from payment of matured treasury bills.

Data from the Financial Market Dealers Quote (FMDQ) revealed that interest rate on collateralised lending rose from 15 per cent previous week to 25.33 per cent on Monday, but dropped to 9.0 per cent at the close of business on Friday.

Similarly, interest rate for overnight lending rose from 15.25 per cent the previous week to 28.17 per cent on Monday, but dropped to 9.75 per cent at the close of the week.

This trend according to analysts at Afrinvest Plc may persist this week due to the liquidity mop-up by the CBN.

“We expect the CBN to continue with its aggressive Open Market Operations (OMO) mop ups while Open Buy Back (OBB)  and Overnight (OVN) rates remain in the double digit band”, they said.

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