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OMO: Towards strengthening the naira

Features & Reports

A mix of $831.5 million foreign exchange (about N254 billion at N305.75/$) and Open Market Operation (OMO) auctions by the Central Bank of Nigeria (CBN) last week, reduced the quantity of naira in circulation and stabilised exchange rate across segments through the weekend.

It however, unsettled bankers as they jostled to grab every available naira in the money market to offset their obligations for participating in both auctions, leading to earlier spike in the lending rates among banks, before its moderation.

The first two days of the week were full of activities as the monetary authority offered $418 million and $13.5 million respectively, while on the other hand, it intervened through OMO, mopping up N5.3 billion and N2.1 billion in each day.

With other monetary policy actions in the week like the maturing bills and rollover at 16 per cent, it also mopped up N86.8 billion, keeping interbank lending rates at 15.2% and 15.7% for Open Buy Back and Overnight instruments respectively.

This was followed by N200 billion roll-over on Friday, in a 181-day special Treasury bill auction at 16 per cent, according to traders. Consequently, parallel market exchange rate remained stable at N367 per dollar throughout, while the recently inaugurated Investors and Exporters window traded near convergence with parallel market at N371 per dollar.

The Managing Director, Stanbic IBTC Bank, Dr. Demola Shogunle, while speaking at the 333rd meeting of the Bankers Committee, affirmed that Investors and Exporters window has recorded $2.3 billion transactions, with CBN contributing less than 30 per cent of the sum exchanged.

On the other hand, the Acting Director, Corporate Communications, CBN, Isaac Okorafor, assured that the interventions will continue to guarantee stability in the market and ensure availability to individuals and business concerns.

—-Adapted from Guardian