The Central Bank of Nigeria (CBN) has absorbed about ₦4.686 trillion from the financial system through Open Market Operations (OMO), almost twice the ₦2.433 trillion in OMO bills that matured on the same day.
The September 29 auction saw the apex bank allot nearly ₦2.19 trillion above its initial ₦2.5 trillion offer, highlighting strong investor demand for the short-term securities. The latest operation brings the CBN’s OMO sales for September to about ₦17.5 trillion across five auctions.
Investors submit ₦6.4tn bids
Investors submitted a combined ₦6.399 trillion in bids across three instruments offered at the auction, representing demand of about 2.56 times the advertised amount.
The newly introduced 266-day OMO bill attracted the strongest demand, receiving ₦4.543 trillion in subscriptions against an initial offer of ₦1 trillion. The CBN ultimately allotted ₦2.996 trillion on the instrument.
The 182-day bill attracted ₦1.337 trillion in bids and received an allotment of ₦1.225 trillion, while the 147-day instrument attracted ₦519.4 billion and recorded an allotment of ₦464.4 billion.
Stop rates declined across the three tenors, with the 147-day bill clearing at 17.24%, the 182-day instrument at 16.94%, and the 266-day paper at 16.23%.
Despite the difference in stop rates, true yields were more closely clustered between 18.41% and 18.53%.
Liquidity absorption intensifies
The scale of the latest operation means the CBN withdrew about ₦2.253 trillion more than the ₦2.433 trillion that matured on September 29.
Successful allotments were therefore about 1.93 times the value of the maturing OMO bills. The development comes against a backdrop of substantial liquidity in the banking system, with more than ₦6.2 trillion recorded at the CBN’s Standing Deposit Facility as of September 29.
Compared with the September 24 OMO auction, subscriptions rose by about 11.5%, from ₦5.741 trillion to ₦6.399 trillion. Successful allotments also more than doubled, rising from ₦2.255 trillion to ₦4.686 trillion.
The latest auction brings the CBN’s September OMO allotments to roughly ₦17.5 trillion, significantly above the combined headline offer of about ₦6.4 trillion for the five auctions.
The development continues the CBN’s aggressive liquidity-management operations, following about ₦7.18 trillion in OMO sales during July and a further ₦4.69 trillion absorbed through back-to-back auctions in early August.
Investors favour longer-dated OMO bills
The strong demand for the 266-day instrument suggests investors remain willing to lock funds into longer-dated short-term securities even as yields moderate.
The latest auction also comes shortly after the CBN reduced its Monetary Policy Rate by 350 basis points to 23%, making the direction of short-term interest rates an important consideration for fixed-income investors.
For the CBN, the latest OMO operation provides another avenue to manage excess liquidity in the banking system. For investors, the strong subscription levels point to continued appetite for naira-denominated fixed-income instruments despite the recent easing in rates.
