Nigeria: CBN to Mop Up N245 Billion As Cost of Funds Falls By 50 Percent

The Central Bank of Nigeria (CBN) will this week mop up N245 billion from the interbank money market in a bid to reduce money supply in the economy. Meanwhile, cost of funds in the interbank money market fell by more than 50 percent last week due to inflow of N315 billion which increased the amount of idle funds in the market.

Vanguard investigations revealed that the CBN will this week mop N245 billion through sales of government securities (treasury bills). The apex bank plans to sell N45.1 billion worth of 91 days bills, N80 billion worth of 182 days bills and N120 billion worth of 364 days bills. This is to mop up liquidity that would be injected into the system through payment for matured bills of the same amount and category.

Last week, the market experienced N315 billion inflow comprising N268 billion from Federation Allocation Accounts Committee (FAAC) funds and N47 billion representing Coupon (interest) payment from FGN Bond maturing in 2022. Consequently, market liquidity rose from minus N700 million the previous week to N433 billion at the close of business on Friday.

In response, cost of funds dropped by more than 50 percent with interest rates on Overnight and Colateralised (Open Buy Back) lending fall to 5.0 percent from 12 percent the previous week. The liquidity increase also triggered excess demand for treasury bills (TBs), with investors demanding for N249 billion worth of bills as against N120 billion worth of bills offered by the CBN.