CBN Raises N1.19trn from OMO Bills Investors, Rejects Bids
The Central Bank of Nigeria (CBN) raised N1.19 trillion across two open market operation (OMO) auctions the authority conducted last week to replace expired instruments and put a tab on excess liquidity in the financial system.
Foreign portfolio investors were active at the auction, as juicy rates on the short-term instruments attracted attention, drawing hot money into the economy. OMO auctions have been rapid as the CBN hunts for FX inflows to ensure long-term stability of the local currency, the naira.
MarketForces Africa reported that the two auctions were well received by offshore investors and local banks seeking high yields from placement in OMO bills to boost earnings. Fixed income market analysts observed that the OMO bills sold last week were for shorter tenors, and spot rates were significantly higher than market expectations.
Investment analysts said higher rates on these short-term instruments reflect the authority interest in making foreign portfolio investors comfortable in spite of the slowdown in headline inflation.
To sterilise excess liquidity, the CBN floated N700.00 billion across the 83 days OMO bills worth N300.00 billion and 84 days bills totalling N400.00 billion. Aggregate demand from investors was robust, as the auction recorded a total subscription of N1.57 trillion, translating to a bid-to-offer of 2.2x. Out of the total amounts in bids submitted, the Apex Bank raised N1.19 trillion and rejected the remaining.
The CBN raised about N1.2 trillion with the stop rate closing at 26.49% and 26.50% for the 83-day and 84-day maturity, respectively. The market anticipates another OMO auction this week due to OMO maturities of ₦459.60 billion that will expire.
In the secondary market, yield on Nigerian OMO Bills fell as investors sought to boost portfolios following the main auction rejection by the CBN. Hence, the average yield dipped slightly by 3bps to 25.5% in the OMO bills segment in the secondary market. #CBN Raises N1.19trn from OMO Bills Investors, Rejects Bids Nigerian Exchange 27.84% Return Antidote for Inflation
