The Open Market Operations (OMOs) by the Central Bank of Nigeria (CBN), which rose to as high as 18 times in one year, are seen declining as inflationary pressures slow.
The CBN sold N11.8 trillion OMO bills to banks and investors in 2024, rising by 1,773.7 percent compared to N627.2 billion auctioned in 2023, data from the CBN indicated.
The data show that year-to-date, the CBN has auctioned OMO worth N1.9 trillion and repaid N744.8 billion since the beginning of the year.
Ayokunle Olubunmi, head of financial institution ratings at Agusto & Co, said the uptick in OMO activities reflect the contractionary stance of the monetary authority.
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The NBS last week rebased the CPI reading, which revealed a sharp reduction in Nigeria’s headline inflation rate to 24.5 percent year/year in January 2025 (post-rebasing), compared with the pre-rebasing reading of 34.8 percent y/y in December 2024.
Analysts posit that excess liquidity leads to inflation, which weakens the naira’s purchasing power. By selling OMO bills, the CBN mops up excess naira, reducing inflationary pressure and helping to maintain the naira’s stability.
In spite the increased mop-up through OMO sales, Money supply (M3), as measured by the broad monetary aggregate M3, hit a record high of N110.98 trillion in the first month of 2025, marking an increase of N2.02 trillion or 1.85 percent compared to N108.96 trillion in November last year.
The data also show that currency in circulation rose to an all-time high of N5.23 trillion in January 2025. On a month-on-month basis, money in circulation increased by 7.4 percent or N360 billion from N4.87 trillion recorded in November 2024.
