N2.48tn OMO repayment accounts for nearly half of liquidity released in one day….
The Central Bank of Nigeria injected a net N5.21 trillion into the banking system between August 4 and 11, largely through repayments on maturing Open Market Operations and Treasury Bills.
Financial data from the apex bank showed that the largest single-day liquidity release occurred on August 11, when the CBN repaid N2.48 trillion from an OMO transaction.
The repayment accounted for about 47.6 per cent of the total liquidity released during the period.
The CBN also made N2.73 trillion in primary market repayments on August 4 and August 6, comprising N2.45 trillion and N283.78 billion respectively.
The substantial liquidity injection comes as the apex bank returns to the primary market on Wednesday, August 12, with a N700 billion Treasury Bills auction on behalf of the Debt Management Office.
The auction follows the cancellation of a similar N700 billion offer scheduled for August 5, after the CBN had conducted back-to-back OMO sales that withdrew a combined N4.69 trillion from the banking system on August 3 and 4.
The latest repayments have therefore returned a significant amount of cash to the financial system ahead of the Treasury Bills auction.
Analysts had anticipated about N1.58 trillion in OMO maturities for the week, meaning the N2.48 trillion repayment recorded on August 11 exceeded the projected amount.
Market participants are watching the latest auction closely, with the sizeable liquidity release expected to influence demand and pricing.
Recent Treasury Bills auctions have attracted strong subscriptions, with investors particularly favouring longer-dated instruments.
At the July 29 auction, the CBN allotted about N1.25 trillion against an initial offer of N700 billion, driven largely by demand for the 364-day bill.
At the July 8 auction, the apex bank allotted N1.06 trillion, while the stop rate on the one-year bill rose to 17.70 per cent from 17.34 per cent previously.
The 182-day tenor, however, attracted weaker demand, receiving subscriptions of N29.94 billion against the N100 billion offered.
The current auction comes after the CBN intensified its liquidity management operations in July, when it mopped up about N7.18 trillion through OMO sales.
The latest pattern shows the apex bank alternating between aggressive liquidity withdrawals and substantial repayments into the banking system.
With N5.21 trillion now released ahead of the N700 billion Treasury Bills auction, market participants will be watching the level of subscriptions and the resulting stop rates for indications of how much of the available liquidity will be absorbed.
The auction outcome could also provide a clearer signal on whether the increased liquidity will put downward pressure on Treasury Bills yields or be absorbed by continued institutional demand for government securities.
