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IMF advises CBN to raise N2 trillion through OMO bills in the next 12months 

The International Monetary Fund (IMF) has advised the Central Bank of Nigeria to as a measure to rein in on inflation mop up excess liquidity in the economy through raising OMO bill of up to N2 trillion in the next 12 months.  

This was contained in the Fund’s Post Financing and Assessment Discussion and Staff Report of Nigeria published by the fund.  

According to the report, the IMF advised that there should be a sustained monetary policy tightening to bring down inflation. 

  • It stated, “Continue withdrawing excess liquidity using short term instruments (OMOs or repos). The initial aim should be to extract the remaining 800 billion naira in excess reserves, and up to naira 2 trillion over the next 12 months.” 

The advice from the IMF comes on the heels of the CBN recording an oversubscription of N2.3 trillion for its N1 trillion treasury bills offer.

The 364 days treasury bills saw an oversubscription of N1.8 trillion with investors bidding between 13% and 29.9% interest rates.  

Inflation and debt obligation 

Furthermore, the IMF noted that Nigeria can meet its debt obligation requirements even though some risk persists. Specifically, it mentioned that such risk includes inflation triggered depreciation of the naira or a climate shock all have potentials to weaken the payment indicators.  

However, the fund also estimated that while inflation might slow in the first quarter of 2024, reaching about 17% by the year’s end.

However, food inflation will remain high going for the most part of the year till the last quarter with the depreciation of the naira primed as the major cause.  

  • It stated, “By end 2024, inflation should gradually return to historical levels (17 percent year-on-year at end-2024), helped by base effects phasing out and assuming monetary policy tightening.” 

What you should know  

  • In the first three months upon resumption of the leadership of the apex bank, the currency in circulation rose by N890 billion to N3.65 trillion as of December 2023 representing a 32% rise.  
  • The CBN had attributed the excess cash in circulation to be one of the factors fuelling the increased inflation.  
  • To mop out excess cash liquidity in the economy, the apex bank sometimes deploys issuance of OMO bills.  
  • The CBN’s last OMO bills issuance was oversubscribed by N157 billion for the 363-day bills with the stop rate at 17.75%  

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