Even as most Nigerians are saying there is no money to meet daily financial needs, and the private sector struggling to find investible funds, latest figures from investment bankers and the Central Bank of Nigeria (CBN) have shown that from June 2016 till date (barely two months), a whopping N1.3 trillion has been mopped up through Open Market Operation (OMO) auctions by the CBN.
The apex bank in pursuit of aggressive Monetary Policy Tightening, cleared this amount which investment analysts at a Lagos-based securities house, Afrinvest, estimated to be N40 billion short of total value of auctions carried out all through six months or half year (H2):2015.
According to the analysts, this was also in CBN’s aggressive effort to push interest rates higher and attract foreign capital (FPI & FDI) into the economy and reduce external sector pressures, thereby supporting the stability of the domestic economy.
According to the analysts, though tight monetary policy stance has remained largely predominant since November 2011 (with Monetary Policy Rate hovering between 11 per cent and 14 per cent since then till date), the recent policy thrust of the CBN suggests the aggressive nature of tightening for which a number of criticisms have been generated from both trade and industrial circles as well as political space.
As a result of the above development, the securities house said shorter term rates in the secondary fixed income market have adjusted upward to 15.7 per cent on average from below 12 per cent in May 2016 with discount yields on 364-Day treasury (T)-bills instrument trading as high as 22.4 per cent.
It should be recalled that a professor of Economics at the university of Ibadan who went all the way to do a research sponsored by Magnum Trust Bank Plc, Professor Ademola Ariyo, said that in spite of the existence and activities of relevant intermediation institutions and financial sector regulatory agencies, excess liquidity has become persistent macroeconomic headache for Nigeria over the years.
Ariyo said that the government which is adjudged the major cause of excess liquidity is also considered the greatest benefactor of its management strategy employed by CBN while the private sector, is the worst victim. He stated that while fiscal operations of government is the overriding cause of the liquidity problem in the country, banking system credit to the public sector is another major cause. It therefore appears that the problem of (excess) liquidity revolves around the public sector in Nigeria.