The Central Bank of Nigeria has mopped up over N4tn from the system since the beginning of the year, a report has shown.

According to a report obtained from the Financial Derivative Company Limited on Thursday, the amount mopped up represents 25 per cent of total money supply.

The Managing Director, FDC, Mr. Bismarck Rewane, said conventional logic suggested that interest rates should have increased significantly.

He, however, said in reality, interest rates had remained low and were trending downwards.

Rewane said in the report, “Contrary to analysts’ expectations, interest rates have maintained a downward trend. This is despite the CBN’s resolve to maintain its current contractionary monetary policy stance at its last Monetary Policy Committee meeting in March. A total of N1.74tn was mopped up as OMO auctions from the system in March; so far in April, a total of N1.41trn.”

However, average inter-bank rates remain low between 11 per cent and 11.5 per cent per annum, 200 basis points lower than previous months.

He said the CBN had intensified its mopping up strategy with the inclusion of special Open Market Operation auctions to augment its regular OMOs.

 ÃƒÂ¢Ã¢â€šÂ¬Ã…“This notwithstanding, interest rates are yet to firm up. As at the end of March, the money market recorded a net outflow of N57.24bn and average Nigerian Inter Bank Offered Rate was 11.42 per cent compared to 13.14 per cent in February,” Rewane added.

According to Financial Market Dealers Association, so far in April, the trend has remained the same with frequent CBN interventions, while interest rates remain soft.

 Whilst manufacturers are clamouring for lower interest rates, investors and lenders are vying for the opposite. The CBN, nonetheless, is resolute to maintain its stance until convinced that inflationary risks are benign.

On the outlook, the report stated, “There is a general consensus that 2013 will be a year of an accommodative monetary policy stance. However, the MPC is yet to alter its position on monetary policy, monitoring closely inflation and the exchange rate.

“There has been renewed pressure on the exchange rate and Nigeria’s external reserves remain robust at $49bn.

“These indicators reflect market sentiments of a declining interest rate environment. Costs of funds are being re-priced to factor in this trend as investors and portfolio managers take positions based on expectations of lower rates.”

Source: Punch (by Ademola Alawiye)