The Central Bank of Nigeria has engaged in an Open Market Operation (OMO) auction on Thursday, August 10, 2023, successfully absorbing approximately N150 billion from the financial system. The purpose of this action is to combat inflation and mitigate the surplus liquidity, which in turn has put pressure on the Forex market. Commencing at approximately 9:40 am and concluding at 10:40 am on the same day, the OMO auction consisted of various bill tenures. Specifically, it comprised N30 billion for 96-day tenured bills, N40 billion for 187-day bills, and N80 billion for 362-day bills.
This strategic move by the Central Bank serves the objective of curtailing the excess funds circulating within the economy. Notably, this is the first auction conducted by the CBN since July, when it opted to raise interest rates. However, the aftermath of this recent operation saw the naira's value decline even further, reaching a staggering N920 per dollar within the parallel market on Thursday, August 10, 2023. Contrasting this, the naira initiated trading at N757 on Wednesday, August 9, 2023, within the official Investors and Exporters (I&E) window, as indicated by information from BusinessDay.
The underlying goal of the CBN's auction was to siphon off the excess liquidity present in the financial system, thereby curbing the prevailing inflation rate which currently stands at 22.79%. To execute this, the CBN employs the issuance of Treasury Bills within two distinct market platforms: the primary market and the secondary market known as OMO. The secondary market facilitates the exchange of T-Bills among banks and other authorized dealers.
As a consequence of the CBN's recent adjustment in interest rates, Nigerian T-Bill yields across various tenors, spanning short, medium, and long-term durations, have experienced significant increases. This shift in monetary policy leverages an asymmetric corridor, an approach adopted by the CBN to enhance the flexibility of their monetary policy strategies.
This development in the financial landscape occurs within the backdrop of Access Bank and the broader banking industry, which remains interconnected with the Central Bank's initiatives.
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