CBN Conducts 3 OMO Bills Auctions, Cuts Interest Rate
The Central Bank of Nigeria (CBN) conducted three OMO auctions last week, all of which attracted strong investor participation. At the first auction earlier in the week, the CBN offered N600.00 billion across the 210-day and 350-day maturities.
Investor appetite was elevated, with total subscription reaching N4.87 trillion, with an 82.69% skew towards the longer tenor, according to Coronation Merchant Bank Limited.
However, no allotment was made – indicating resistance to prevailing bid levels, investment firm Cowry Asset Management Limited said in a commentary note.
At the subsequent auction on Thursday, the CBN again offered N600.00 billion, this time across the 208-day and 348-day maturities.
Demand remained robust, with total subscription rising to N5.93 trillion, an increase of +22.83% from the previous auction. Allotments amounted to N3.79 trillion, translating to a bid-to-cover ratio of 1.57x and a bid-to-offer ratio of 9.88x.
Stop rates declined, settling at 17.20% from 19.38% per annum on the 208-day bill and 17.25% on the 348-day bill. On Friday, another N600.00 billion was offered across the 207- day and 354-day maturities.
Total subscription came in at N2.56 trillion, with no sale on the 207-day bill, while N2.11 trillion was allotted on the 354-day bill at 17.25%. Last week, system liquidity moderated, closing at N1.87 trillion from N2.78 trillion, despite inflows of N2.14 trillion from OMO maturities.
The funding system tapered after CBN intensified its sterilization efforts through a series of OMO auctions, with N5.89tn allotment across two out of three open market operations.
The significant decline in liquidity pushed money market rates higher, with the overnight lending rate rising to 26.36% from 22.79%, and the repo rate increased to 26.07% from 22.50%. UBA Target Price Sets at N62, 40% Upside Potential Projected
