NBE absorbed half a trillion birr
A record amount of liquidity was traded this week as the National Bank of Ethiopia (NBE) celebrated the first full year of its Open Market Operations (OMO) auctions. Since implementing the new monetary policy framework in early July of last year, the central bank has held its inaugural OMO auctions, with commercial banks actively participating and trading over half a trillion birr.
In the past year, the NBE absorbed an impressive 579.4 billion birr through these auctions. The liquidity-absorbing instrument, offering a National Bank Rate (NBR) of 15%, has generated significant interest among banks.
With a two-week maturity period, the OMO serves as an effective tool for controlling inflation.
Under the new monetary policy framework launched at the beginning of the 2024/25 fiscal year, the NBE conducts biweekly auctions to manage liquidity within the banking system, adjusting its approach based on economic conditions to either withdraw or inject funds.
To date, the NBE has primarily focused on absorbing excess liquidity rather than injecting funds.
Over the past year, a total of 26 OMO auctions were held, with an average of five bidders participating in each session.
According to NBE data, the highest participation occurred during the second auction on July 25, 2024, where 21 banks participated, with an allotted amount of 37.5 billion birr.
In contrast, the lowest participation happened during the 10th auction on November 14, 2024, when only one bidder offered 6.3 billion birr.
Experts noted that financial institutions were less active in the first half of the fiscal year, attributing this to lower liquidity.
However, in the latter half, both the number of participating banks and the amounts offered in the auctions increased significantly.
The largest single auction allotment in the inaugural year was 45.25 billion birr, secured from four bidders during the 19th auction on March 20.
Towards the end of the fiscal year, six participants offered a total of 44 billion birr.
The most recent OMO auction, held on Thursday, July 10, 2025—the first for the new budget year—saw a record allotment of 64.9 billion birr from 13 banks, the largest amount since the market’s inception a year ago.
Experts explained that OMOs are crucial tools used by central banks to regulate money supply and influence interest rates, primarily in the secondary market for government securities.
While OMOs can impact the primary market, their main purpose is to manage liquidity and credit conditions in the broader economy.
When excess liquidity in the banking system causes the interbank market rate to fall significantly below the NBR, the central bank conducts OMO auctions to withdraw the surplus.
Conversely, if a liquidity shortage pushes the interbank market rate well above the NBR, the NBE will use OMO auctions to inject liquidity into the market.
Additionally, as part of its latest monetary policy framework, the NBE has introduced an Overnight Lending Facility and an Overnight Deposit Facility to assist banks in managing their daily liquidity needs.
These standing facilities will be available at the NBR rate plus or minus 3%, providing banks with flexible options for short-term liquidity management. So far, 834 billion birr has been traded in these instruments.
