The Central Bank of Nigeria (CBN) has seen its latest attempt to drain excess liquidity from the banking system backfire, as banks’ deposits at the apex bank climbed to N8.31 trillion after a fresh Open Market Operations (OMO) auction.
OMOs are the main tool the CBN uses to absorb surplus reserves that banks hold at the central bank. By selling government securities, the bank hopes to reduce the amount of money banks can lend, thereby tightening the money supply.
Despite the recent auction, the rise in deposits suggests that banks are still hoarding large balances at the CBN, signalling a build‑up of liquidity that the central bank’s policy measures have not yet curbed.
In Nigeria – Africa’s most populous country and a key economy in West Africa – the central bank’s ability to manage liquidity is crucial for keeping inflation in check and supporting stable growth.
With the mop‑up operation proving ineffective so far, the CBN may need to rethink its approach or introduce additional tools to bring the banking system’s reserves back in line with policy objectives.
<small>Source: Punch Nigeria — read the original story there.</small>