CBN Drains N6.62tn From Banking System as September OMO Sales Hit N17.51tn

The Central Bank of Nigeria withdrew an estimated N6.62 trillion in net liquidity from the financial system in September after fresh Open Market Operations sales substantially exceeded the value of securities that matured during the month.

Data from the apex bank’s September auctions show that approximately N17.51 trillion worth of OMO bills was allotted across five auctions, while about N10.89 trillion flowed back to investors as previously issued securities matured.

The difference left approximately N6.62 trillion removed from the financial system on a net basis, highlighting the scale of the CBN’s effort to manage excess naira liquidity.

The CBN conducted five OMO auctions during the month with reported allotments of N2.88 trillion, N4.40 trillion, N3.29 trillion, N2.26 trillion and N4.69 trillion.

Maturing securities included N62 billion on September 7, N3.07 trillion on September 8, N3.06 trillion on September 15, N2.27 trillion on September 22 and N2.43 trillion on September 29.

This means about 62 percent of September’s gross OMO sales offset cash returning from matured securities, while the balance represented additional net absorption.

Investor demand substantially exceeded the amount eventually allotted with subscriptions across the five September auctions reaching approximately N27 trillion, compared with about N18.72 trillion in August.

Demand was particularly strong at the September 29 auction, where a 266-day instrument attracted approximately N4.54 trillion in subscriptions against N1 trillion initially offered.

The CBN eventually allotted about N3 trillion on the instrument at a stop rate of 16.23 percent.

Other instruments at the auction cleared at 16.94 percent and 17.24 percent, compared with rates as high as 18.99 percent on longer-dated securities earlier in September.

More than N6.2 trillion was also reportedly placed with the CBN through its Standing Deposit Facility as of September 29, indicating that substantial funds remained within the banking system despite the OMO withdrawals.

The operations came during a period of adjustment in monetary policy after the CBN lowered the Monetary Policy Rate to 23 percent from 26.5 percent while retaining the Cash Reserve Requirement for deposit money banks at 45 percent.

The combination shows the apex bank reducing its benchmark interest rate while continuing to use OMO securities to control excess funds circulating through the financial system.

One caveat remains in the underlying figures. Published data for the September 16 auction reportedly show an allotment of approximately N3.292 trillion against subscriptions of about N3.034 trillion.

The N17.51 trillion gross sales and N6.62 trillion net withdrawal figures are therefore based on the reported auction numbers.

Even with that qualification, September’s operations show that the CBN sold substantially more OMO securities than matured during the month, resulting in a significant net withdrawal of naira liquidity from the financial system.