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CBN Sustains Aggressive OMO Auction, Mops up Fresh N92b

By Modupe Gbadeyanka

For the third consecutive time this week and the fifth time in a row, the Central Bank of Nigeria (CBN) floated an Open Market Operation (OMO) auction on Wednesday.

Yesterday’s exercise was to take out excess cash from the system as over N700 billion hit the system from FAAC payment earlier this week, while another inflow is expected on Thursday in maturing treasury bills.

At Wednesday OMO auction, the apex bank sold a total of N92.08 billion across three maturities it offered to market players.

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According to analysts at Zedcrest Research, the stop rates on the short (92-day), mid- (183-day) and long-end (351-day) maturities were maintained at 11.65 percent, 13.50 percent and 15.00 percent respectively.

A breakdown of the exercise, according to Business Post, showed that N40 million was raised from the 91-day paper from the N30 billion offered, N1.19 billion was generated from the N50 billion of the 183-day note auctioned, while N90.89 billion realised from the N100 billion worth of the 351-day bills offered to investors.

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The CBN is expected to float another OMO auction today to match maturities of N684 billion and Zedcrest Research analysts “maintain a cautious outlook on T-bills in light of the sustained OMO auctions and a possible hike in OMO rate in the short term.”

Meanwhile, money market rates trended higher on Wednesday as the CBN showed no signs of slowing down on its daily OMO T-bills issuance.

Open Buy-Back (OBB) and overnight (O/N) closed higher at 12.00 percent from 8.67 percent and 13.08 percent from 9.50 percent respectively due to the debit of OMO T-bills sales of N92.08 billion.

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System liquidity is consequently estimated at N215.57 billion as at close of business in the midweek session.

The funding rates are expected to drop today as inflows via OMO maturities of N684 billion hit the system and the apex bank is expected to float an OMO auction in a bid to continuously mop up excess liquidity from the banking system and also deter speculative activities on the Naira.

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Modupe Gbadeyanka is a fast-rising journalist with Business Post Nigeria. Her passion for journalism is amazing. She is willing to learn more with a view to becoming one of the best pen-pushers in Nigeria. Her role models are the duo of CNN's Richard Quest and Christiane Amanpour.

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