BUSINESS
CBN’s OMO Auctions Drop by 67% to N400bn on Weak Economic Activity, Illiquidity
By Joseph Amah, Abuja
As the country’s financial markets continued to dance to the tune of monetary policy implementations, the Central Bank of Nigeria (CBN) in first two months of 2022 auctioned N400 billion worth of Open Market Operation (OMO).Analysis of market data showed that the OMO auctions in the first two months of 2022 represent a decline of 67 per cent when compared to N1.
16 trillion reported by the CBN in first two months of 2021.It is, however, worthy of note that OMO is designed to be a short-term market instrument that the CBN uses to control the supply of money in the economy. Whenever the apex bank believes the inflation rate is high due to increased money supply, it sells OMO at the secondary market to mop-up excess liquidity in the system.
Inflation rate in Nigeria has been on a steady decline since March 2121 when it was at 18.17 per cent to 15.7per cent as at January 2022, according to a report by National Bureau of Statistics (NBS).The data obtained from the CBN revealed that a total of eight OMO sales were carried out between January and February 2022 and since 2021, the apex bank maintained OMO auction every Friday in a bid to control the supply of money.The breakdown revealed that the CBN in January 2022, auction N130billion OMO, followed by February that recorded N270billion OMO auction.The highest OMO auction by CBN was on February 25, 2022 when the CBN offered and allotted N100.00 billion worth of OMO bills to participants and maintained stop rates across the three tenors (96DTM – 7.0per cent, 180DTM – 8.5per cent and 362DTM – 10.1per cent), as with prior auctions. However, the CBN auction at the primary market, between January and February 2022 is N1.25trillion as against N936.5billion primary market sales in prior period of 2021.Before now, the CBN had restricted Nigerian corporates, and individuals access to the OMO market, also, banks were not allowed to buy Treasury bills (T-bills) on behalf of borrowing customers. OMO bills had attracted a juicy interest rate of about 15per cent per annum making them one of the most sought-after securities in Nigeria and indeed emerging markets explaining why foreign investors hold nearly half the size.
The CBN under Godwin Emefiele is understood to have one major mandate; keep the exchange rate stable at all costs and further devaluation of Naira. This is the cornerstone of his monetary policy and underlines every action the apex bank has taken since the President Muhammadu Buhari’s led administration came into power in 2015.Analysts attributed lack of excess liquidity in the economy to the decline in OMO auction in the first two months of 2022.Commenting, The Vice president, Highcap Securities Limited, Mr. David Adnori attributed the decline in OMO auction to low excess liquidity in macro economy, stressing that the N400billion auction by the apex bank is enough to serve its purpose of the economy.
He maintained that the purpose of OMO is to adjust the CBN monetary policy and to ensure money in the economy is not much to spike inflation and price stability. According to him: “The CBN sales T-Bill in two market platforms and the first one primary market auction and secondary market platform called the OMO. The secondary market has a market where banks and other approved dealers change T-Bill among themselves. “Occasionally, from its monetary policy implementations of either increasing or decreasing money supply in the economy, the CBN intervened in the secondary market which is called OMO market auction. “When CBN buys in the OMO, it means they wanted to stabilize the economy. Then, if there is so much money in the economy, then enters secondary market, which is the OMO and sales to withdraw money from the system. The purpose is to improve macroeconomy liquidity. “The reason for the growth in first two months of 2021 was that CBN was complied to auction more OMO at the secondary market, given excess liquidity in circulation. This year, the OMO auction of N400billion means there is no excess liquidity in the economy for CBN to auction.” On his part, analyst at PAC Holdings, Mr. Wole Adeyeye, stated that CBN’s weak activities in OMO market was due to slow in economy activates, stating that banks were concerned about lending to the real sector as demanded by the regulating body.
Mr Adegboyega Oyetola, the Minister of Marine and Blue Economy says upgrading the Maritime Academy of Nigeria (MAN), Oron to a university, will unlock opportunities in the maritime economy.
Oyetola made the expression at the 2024 MAN cadets graduation ceremony in Oron, Akwa Ibom on Saturday.
Represented by Mr Babatunde Bombata, the Director, Maritime Safety and Security, the minister said the Federal Government was working assiduously to unlock opportunities within the marine and blue economy.
He said that the ministry was already collaborating with the Ministry of Education and the Nigerian Universities Commission to ensure MAN’s seamless transition to a university.
“It is our hope that this upgrade will unlock new opportunities for advanced learning, cutting edge research and innovation within the marine and blue economy fields,” he said.
Oyetola urged the graduating cadets to be innovative, resourceful and forward looking in their future endeavours.
“The maritime and blue economy sectors are filled with opportunities, so your contributions to the sector will be instrumental in ensuring a brighter future.
“The government is committed to fostering excellence and innovation in these fields, and we eagerly anticipate the positive impact you will make in your careers,” he said.
He further said that the Federal Government was working on developing a national policy on marine and blue economy.
“This policy will serve as a strategic framework to drive economic diversification, attract investments, create jobs and youth empowerment.
In his remarks, Gov. Umo Eno of Akwa Ibom, said the state government would continue to collaborate with the academy to develop the maritime sector.
Represented by the Commissioner for Internal Security and Waterways, Gen. Koko Essien, (Rtd), Eno urged the graduating cadets to utilise their training in developing the maritime sector.
“I am hopeful that you will utilise the training you have acquired here to further your career as seafarers and in the development of our blue economy,” he said.
Eno commended the Acting Rector, Dr Kevin Okonna and his management team for their commitment towards repositioning the academy for greater results.
Earlier, Okonna said that graduates of the institution had contributed immensely to the growth of Nigeria’s maritime and blue economy.
“Today, we have an opportunity to celebrate a new set of well-trained personnel to the maritime and allied industries.
“We pride ourselves as the pioneer maritime training institution, this is because of the institution’s contributions to national development,” he said.
The acting rector urged the graduating cadets to made effective use of the knowledge gained during their training to make meaningful impact on the growth of the maritime sector.
Report says that awards were given to graduating cadets who distinguished themselves in character and learning. (NAN)
The Nigerian Exchange Ltd. (NGX) continued its bullish trend on Wednesday, gaining N183 billion.
Accordingly, the market capitalisation, which opened at N59.532 trillion, gained N184 billion or 0.31 per cent to close at N59.715 trillion.
The All-Share Index also added 0.31 per cent or 303 points, to settle at 98,509.
68, against 98,206. 97 recorded on Tuesday.Consequently, the Year-To-Date (YTD) return increased to 31.
74 per cent.Gains in Aradel Holdings, Zenith Bank, United Bank For Africa(UBA), Oando Plc, Nigerian Breweries among other advanced equities drove the market performance up.
Market breadth closed positive with 34 gainers and 17 losers.
On the gainers’ chart, Africa Prudential, Conoil and RT Briscoe led by 10 per cent each to close at N14.30, N352 and N2.42 per share, respectively.
Golden Guinea Breweries followed by 9.95 per cent to close at N7.18, while NEM Insurance rose by 9.74 per cent to close at N10.70 per share.
On the other hand, Julius Berger led the losers’ chart by 10 per cent to close at N155.25, Secure Electronic Technology Plc trailed by 9.52 per cent to close at 57k per share.
Multiverse lost 7.63 per cent to close at N5.45, Haldane McCall dropped 6.07 per cent to close at N4.95 and Honeywell Flour shed 5.62 per cent to close at N4.70 per share.
Analysis of the market activities showed trade turnover settled lower relative to the previous session, with the value of transactions down by 49.44 per cent.
A total of 320.10 million shares valued at N6.48 billion were exchanged in 7,943 deals, compared with 939.41 million shares valued at N12.81billion traded in 9,098 deals posted in the previous session.
Meanwhile, ETranzact led the activity chart in volume with 70.27 million shares, while Aradel led in value of deals worth N1.22 billion.(NAN)
The central parity rate of the Chinese currency renminbi, or the Yuan, weakened 22 pips to 7.1870 against the dollar on Monday.This is according to the China Foreign Exchange Trade System.In China’s spot foreign exchange market, the Yuan is allowed to rise or fall by two per cent from the central parity rate each trading day.
The central parity rate of the Yuan against the dollar is based on a weighted average of prices offered by market makers before the opening of the interbank market each business day. (Xinhua/NAN)
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