Banks park N8.31 trillion at CBN despite N724 billion OMO mop-up

In a recent week, the Nigerian banking system maintained substantial liquidity, with Standing Deposit Facility (SDF) balances reaching N8.311 trillion. Despite the Central Bank of Nigeria (CBN) conducting an Open Market Operations (OMO) auction and raising N724.32 billion on November 6, banks still parked a significant amount of N8.311 trillion in the SDF.

This figure increased by N347.44 billion (4.36%) compared to the previous day and N1.345 trillion (19.30%) compared to the day before that. The limited impact of the single OMO auction suggests that the banking system's liquidity will continue to be robust, paving the way for more OMO auctions starting from November 9.

SDF balances had been steadily increasing throughout the week, surpassing the N7.72 trillion elevated liquidity reported by Nairametrics on November 3. This indicates that N591 billion (approximately 7.9%) of the liquidity had been shifted from operating accounts to the SDF over just three days. Furthermore, the CBN's data indicate that primary-market repayments on November 5 exceeded new Treasury Bills auction proceeds by N63.15 billion, resulting in a net injection of N63.15 billion into the system.

The CBN offered N1 trillion through the auction, with subscriptions representing a record-high 188.72% of the bid-to-cover ratio. The CBN allocated N724.32 billion (72.43% of the offer) and left N1.163 trillion unallocated. No new OMO repayments were recorded, meaning this auction served as a fresh mop-up operation rather than a refinancing of maturing bills.

The yields of the two Bills were virtually identical at about 18.84%, although the 179-day bill attracted a stop rate that was 71 basis points higher. The CBN's allocation on November 6 was much smaller compared to earlier operations this month. Nairametrics reports that the CBN allotted about N2.95 trillion during its November 3 OMO auction, accounting for 85.3% of the total N3.46 trillion raised across the OMO and Treasury Bills auctions on November 4.

The N724.32 billion raised on November 6 is roughly a quarter of the N2.95 trillion allotted during the November 3 auction.

Looking ahead, the Financial Markets Dealers Association (FMDA) projects about N13.79 trillion in inflows for November, primarily due to OMO maturities, Foreign Exchange Allocation Committee (FAAC) allocations, and Treasury Bills repayments. Investors will be closely monitoring whether the CBN continues to allot well below subscription levels or adjusts its mop-up operations to match the expected inflows.