The Central Bank of Nigeria (CBN) under the leadership of Governor Olayemi Cardoso has successfully mopped up a staggering sum of N1.51 trillion through Open Market Operation (OMO) bills within the span of four months, a comprehensive analysis by BusinessDay reveals.
The auctions, predominantly featuring long-tenured bills ranging from 180 to 365 days maturity, aimed to curb inflationary pressures and support the faltering value of the naira, which has been experiencing significant depreciation, causing turmoil in the economic landscape.
Despite facing challenges such as high investor bids and a failed auction in December 2023, sources familiar with the matter disclosed that the CBN’s efforts have been largely effective, with a substantial amount raised across five auctions.
The International Monetary Fund (IMF) recently recommended a further increase in OMO bill issuance to up to N2 trillion over the next 12 months, emphasizing the importance of reducing excess liquidity in the economy.
Since the beginning of the year, the CBN has conducted three OMO bill auctions, successfully absorbing N1 trillion in liquidity. Governor Cardoso, in a recent interview, reiterated the CBN’s commitment to its inflation-targeting policy, aiming to rein in inflation to 21.4 percent.
Despite these efforts, Nigeria’s headline inflation rate surged to 29.90 percent last month, according to the National Bureau of Statistics, reflecting the urgency of the CBN’s measures.
With money supply in the country witnessing a significant increase of 44.32 percent in six months, reaching N92.87 trillion as of January 2024, the CBN’s proactive stance underscores its determination to stabilize prices and restore market confidence.
OMO bills serve as a vital liquidity management tool for the CBN, enabling it to regulate the volume of money in circulation. By selling OMO bills to investors, the CBN can absorb excess liquidity and mitigate inflationary pressures, aligning with its mandate of ensuring price stability.
Financial analysts emphasize the importance of interest rate management in combating inflation, suggesting that increasing interest rates can incentivize investments and reduce money supply, thereby curbing inflationary pressures.
As the CBN continues its efforts to navigate the complex economic landscape, the efficacy of its policies and the impact on inflation remain subjects of scrutiny and debate among experts and stakeholders alike.
