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CBN To Mop Up N35bn Liquidity From Banking Sector

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By BUKOLA IDOWU,   with agency reports

The Central Bank of Nigeria (CBN) has said it plans to mop up N35 billion through the sale of short-dated treasury bills as part of efforts to soak up liquidity from the banking system and support the local currency.

Liquidity crunch which hit the banking system last week had begun easing since Monday with overnight lending rate at the interbank market which rose to almost 100 per cent declin to around 18 percent.

CBN said it plans to sell N5 billion of the 190-day open market operations (OMO) bills and N30 billion naira of 330-day paper, according to a notice cited by currency traders. Sales of treasury bills support the currency by draining cash from the market, curbing speculative demand for foreign exchange.

Last week, the apex bank mopped up around N400 billion from the banking system, pushing up interbank rates and leaving some banks scrambling to find cash to cover their positions.

The bank will also auction N140 billion in bonds on behalf of the Debt Management Office as part of measures to fund part of this year’s budget deficit, estimated at around N2.36 trillion.

After introducing a multiple exchange rate system, the regulator has been intervening since February to prop up the naira, a victim of a sharp fall in the oil price and Nigeria’s first recession since 1991.

The value of the naira remained stable at the parallel market selling at N389 to the dollar yesterday, same as it sold on Tuesday. The value of the currency started out at the Investors’ and Exporters’ foreign exchange window stronger selling at N38.71 as against N382.07 which it closed on Monday.

Meanwhile, the apex bank yesterday reiterated the need to secure payment systems in the to stem fraudulent activities in the financial sector.

The director, Banking and Payment Department, CBN, Mr Dipo Fatokun stated this while presenting a keynote address on emerging regulations to protect online, mobile and payment services in Abuja.

The workshop, organised by Maxut Consulting Experts and Vasco Data Security in collaboration with the CBN was centered on the emerging trends in banking and payment systems and regulatory and security implications.

Fatokun said there was the need for continuous effort by stakeholders to develop efficient, reliable and electronic payment systems in the country.

According to him, one of the key tasks of the CBN is to promote the smooth operations of an efficient payment system, which is core to the financial stability of any country.

He said payment systems had important implications for monetary policy implementation and efficiency of the economy.

“To achieve broad objectives of the Payments System, CBN develops and regulates the implementation of regulation to facilitate the growth of initiatives that will harmonise payment operations in the country.

“In its regulatory role, the CBN is careful to approach the dynamic of payment systems policy creation as a delicate balance in order not to stifle innovation and growth in the payment systems.

“In addition, the bank has developed a financial inclusion strategy, the PSV 2020 Vision and cash-less policy drive with specific targets and timelines.

“The sustenance of these initiatives will ensure that financial services are provided at affordable costs to sections of disadvantaged and low-income segments of the society.’’

Fatokun explained that because of the emergence of new technologies, there was a continuous need to update payments system regulation as a result of its dynamic and ever changing nature.

He said the CBN had tried to incorporate all service providers into the regulatory space but some preferred to remain in the unregulated space due to perceived difficulties of licensing and regulation.

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