By Babajide Komolafe
The Central Bank of Nigeria (CBN) on Monday mopped up N91.3 billion from the banking system in continuation of its effort to tighten money supply to check inflationary pressures.
Investigations revealed that the CBN offered N100.0 billion worth of 87 days treasury bills and sold N91.3 billion at a stop rate of 14.05 per cent.
In response cost of funds in the inter-bank money market rose by 17 basis points to 10.5 per cent.
Analysis showed that interest rate on Call/overnight and 7-day lending rose 10.5 per cent and 10.8 per cent against 10.3 per cent and 10.7 per cent respectively on Monday. Meanwhile, the 3-month (or 90 days) interbank rate fell 13.8 per cent, though; less activities are done on the tenor. The secured lending (Open Buy Back) went up slightly to 10.25 per cent for banks and 10.5 per cent for discount houses.
It would be recalled that the CBN has been pursuing tight money supply policy since last year in order to checkmate inflation and stabilize foreign exchange.
In addition to increasing the Cash Reserve Ratio (CRR) for banks to 12 per cent from 8.0 per cent in July, the apex bank has been selling treasury bills to mop up liquidity in the market. Last week it sold a total of N315.88 billion worth of treasury bills.
It sold N136.05 billion of 41- day, 48-day and 55-day OMO bills on 5 October 2012 at stop rate of 13.95 per cent, 13.99 per cent and 14.0 per cent respectively.
It also sold N100.0 billion of 70-day and 84-day OMO bills on 4 October 2012 at 14.0 per cent stop rate for both tenors. The CBN sold N79.88 billion of 72-day and 79-day OMO bills on 2nd October 2012. The stop rate was 14.05 per cent on both tenors.