The Central Bank of Nigeria has increased its net liquidity injection into the interbank money market by 110 per cent to N770 billion in the first quarter of year 2022, from N367 billion in the fourth quarter of last year.
This, the apex bank said, was in line with its pro-economic growth monetary policy.
The CBN, as part of its money supply management tools, sells Open Market Operations treasury bills to mop up idle cash from the banking system.
To reduce money supply, the apex bank assures volume of OMO treasury bills sales is higher than volume of matured OMO bills to be repaid, resulting in net liquidity outflow from the banking system, and the concomitant effect of raising cost of funds in the interbank money market.
To increase money supply, the CBN ensures that the volume of OMO bills sales is lower than matured OMO bills to be repaid and this results in net liquidity inflow into the banking system and fall in cost of funds.
In Q1’22, OMO auction results showed that the CBN sold N520 billion worth of bills during the period. This represents 140 per cent quarter-on-quarter increase from N216 billion worth of OMO bills sold in Q4’21, while the amount of matured OMO bills repaid during the quarter rose to N1.289 trillion in Q1’22.
This resulted in net liquidity inflow of N770 billion in the interbank money market in Q1’22, representing 110 per cent increase from N367 billion in Q4’21.