CBN Mops N132bn from Circulation


By Emele Onu, 06.30.2010 


The Central Bank of Nigeria (CBN) plans to raise the sum of N132 billion today, as part of its mop up activities, using its open market operations. The monetary authority plans to raise N132.14billion in 91-day, 182-day and 364-day treasury bills.



Details of the planned auction as released by the apex bank indicated it would issue N31.84 billion in 91-day treasury bills, N50.30 billion in 182-day bills and N50 billion in 364-day bonds.The result of the transaction, which would be through the Dutch Auction System, is expected to be released tomorrow. 



CBN undertakes OMO as a monetary control measure – to control the supply of money, influence cost of funds and check inflation among others. An analyst told THISDAY that the expansionary monetary policy implemented by the regulator would require close monitoring of the money in circulation in the economy. 



“But I think even though the expansionary monetary policy may induce high liquidity, it would not pose a problem to the CBN for now. The reason is that it is not translating to increase in credit to the domestic economy. Banks need to resume lending before we can see threat to the monetary system,” the analyst said.Money in circulation as at the end of May, 2010 stood at N1.056 trillion, lower than N1.184 trillion at the end of December, 2009.



Broad Money (M2) declined by 3.11 per cent in January 2010, which was significantly below the indicative benchmark of 29.26 per cent growth for 2010. The CBN reported that the annualised decline in aggregate domestic credit (net) as at January 2010 was 22.44 per cent, compared with the provisional benchmark growth rate of 82.8 per cent for 2010. 



“As in most periods of 2009, reserve money continued to be below the indicative benchmark for the first quarter of 2010 in the first two months of 2010. The annualised growth rate of private sector credit was -16.20 per cent, significantly below the provisional benchmark of 31.54 per cent. This indicated that the private sector particularly, small and medium enterprises, were being starved of the much-needed credit,” said the CBN.





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