By Dipo Olowookere
The sum of N2.1 trillion was paid as interest on the N22.350 trillion Open Markets Operations (OMO) issued by the Central Bank of Nigeria (CBN) in 2018.
Business Post reports that this information was disclosed in the Annual Activity Report of the CBN released on Tuesday.
The apex bank said in the report that this amount used in the management of liquidity in the money market last year was higher than the N1.489 billion spent on N11.347 billion in 2017.
According to the report, a total of N34.610 trillion OMO bills were issued during the year, higher than N13.763 trillion of the previous year, while a total subscriptions worth N24.916 trillion were received from investors during the OMO auctions in 2018, higher than N12.345 trillion in 2017.
In the report, the central bank attributed the high level of activity during the review period to the increased number of auctions to moderate the excess banking system liquidity, occasioned by the payments of statutory revenue to the three tiers of government, other fiscal disbursements and maturing CBN Bills, amongst others.
Meanwhile, the report said at the inter-bank funds market, the value of transactions decreased by 94.95 percent to N1.662 trillion in 2018 from N32.910 trillion in 2017.
It was stated that Open Buy Back (OBB) transactions accounted for 96.35 percent of the total value of interbank deals, while transactions at the unsecured inter-bank segment accounted for the balance of 3.65 percent, compared with 94.83 and 5.17 percent respectively in 2017.
A breakdown of the transactions at the inter-bank market showed appreciable decline in call placements by 96.22 percent to N60.70 billion from N1.604 trillion in 2017.
At the OBB segment, transactions decreased substantially, by 94.87 percent to N1.601 trillion from N31.208 trillion in 2017.
The sharp decline in the volume of transactions in 2018 was traceable to the banking system preference for OMO auctions.
Furthermore, the report said interest rates at all segments of the market mirrored the level of liquidity in the banking system and market players’ response to the bank’s policy direction. The fiscal operations of the federal government, effects of CRR maintenance, settlement for foreign exchange interventions, maturity of OMO Bills and liquidity withdrawals through the conduct of OMO by the bank were the dominant factors that influenced the banking system’s net liquidity levels and the movement in interest rates.
Compared with 21.36 and 24.61 percent in 2017, the annual average overnight inter-bank call and OBB rates were 13.11 and 12.15 percent in 2018. The interbank call rates ranged from 1.00 to 140.00 percent, while the OBB rates were between 1.85 and 131.04 percent in the same period.
The monthly average rate at the overnight segment was 14.72 percent in January, peaked at 25.43 percent in May and closed at 22.68 per cent in December 2018. Correspondingly, the monthly average OBB rate was 10.04 percent in January, peaked and closed at 21.64 percent in December.
The Nigerian Interbank Offered Rate (NIBOR) for call and 30-day tenors averaged 13.90 and 13.75 percent in 2018, compared with 25.49 and 25.21 percent in 2017, respectively.
