The Central Bank of Nigeria’s aggressive liquidity control measures have pushed benchmark yields on Open Market Operations bills to 20.87 per cent as the apex bank intensifies efforts to reduce excess cash in the financial system and tackle inflation.
The latest increase reflects the CBN’s continued tight monetary policy stance aimed at stabilising the economy and supporting the naira.
Market analysts noted that the average OMO yield climbed from 20.73 per cent recorded the previous week, indicating stronger intervention by the apex bank to absorb surplus liquidity from commercial banks.
According to data contained in the Futureview Weekly Economic and Financial Markets Update, the rise in OMO yields contrasts with Treasury Bills performance, where average benchmark yields eased slightly to 17.41 per cent from 17.47 per cent due to sustained investor demand.
A capital market analyst explained that the widening gap between OMO bills and Treasury Bills highlights the CBN’s strong focus on inflation control and liquidity tightening.
“The upward movement in OMO yields to 20.87 per cent clearly demonstrates that the CBN is ready to pay a higher premium to lock up loose liquidity within the banking system,” the analyst stated.
The analyst further noted that the strategy is also designed to reduce speculative activities in the foreign exchange market.
“By keeping OMO rates highly attractive, the CBN is effectively discouraging commercial banks from speculative foreign exchange trading, channelling that liquidity instead into risk-free CBN instruments to support the naira,” he added.
Despite the tighter monetary conditions, liquidity within the banking system increased slightly to N5.86tn from N5.67tn recorded the previous week.
However, experts said the improvement in liquidity did not significantly reduce borrowing costs within the interbank market.
An interbank trading executive explained that the CBN maintained strict control over access to liquidity through its discount window.
“Despite the liquidity buffer flowing through the system, funding rates moved slightly higher because the CBN maintained a very tight leash on the discount window,” the trader said.
He added that the apex bank’s approach helped prevent lending rates from dropping sharply across the market.
“The Open Repo Rate closed unchanged at 22.00 per cent, which underscores the current monetary reality, while the Overnight rate inched up to 22.24 per cent from 22.21 per cent, indicating mild but persistent funding pressure within the banking system,” he stated.
Meanwhile, the naira continued to face pressure in the foreign exchange market due to sustained demand for the US dollar.
At the official foreign exchange market, the naira weakened to N1,371.04 per dollar compared to N1,361.40 recorded the previous week.
The local currency also depreciated slightly at the parallel market, closing at N1,400 per dollar against N1,395 per dollar recorded in the earlier trading session.
