Foreign Investors’ Appetite for Nigeria’s OMO Bills Increase
Due to better rate, foreign portfolio investors (FPIs) brought significant amount of hard currency to Nigeria’s OMO auction in November, amidst plan to boost their return.
The appetite for the naira assets has increased amidst reforms, economic growth despite discoloration from other key market indices.
The race to safe haven has begun with major central bankers cutting rates simultaneously and successively as inflation worries eased.
The Central Bank of Nigeria (CBN) claimed that foreign currency inflows lifted the US dollar liquidity level, reflecting foreign investors assessment of Nigerian market ahead of $.2.2 billion external borrowings in pipeline.
Analysts have predicted that Nigeria’s interest rate generosity would make potential Eurobonds raise oversubscribed by offshore investors.
At the CBN primary market for OMO auction, investors staked N1.5 trillion on N300 billion that was in offer.
Auction details revealed that the N300 billion offered by the CBN was across the 91-, 182-, and 364-day notes.
However, investor interest was only seen at the long-end of the curve with a bid-to-offer ratio of 5.8x. For 364-day OMO bills, standard offer made to investors was N250 billion.
Reflecting the market preference, investors parked N1.5 trillion on 364-day OMO bills alone at the main auction, according to auction result.
The CBN took advantage of the bullish bet, and allotted N1.5 trillion to investors, both local banks and foreign portfolio investors.
The short- and mid-dated OMO bills instruments recorded no interest. Nonetheless, the stop rate cleared at 24.3% – the same as the previous month.
Last week, interbank market saw good liquidity with the Naira receiving support from inflows from foreign portfolio investors, exporters, and the central bank’s involvement in the market.
In a note, Cordros Capital Limited also hinted about FX inflows from FPIs in anticipation of an OMO auction.
The central bank reportedly sold around $116 million at exchange rates ranging from N1,655 to N1,660, AIICO Capital Limited said in a note.
However, due to increased demand, the Naira experienced a weekly decline of 1.21%, closing at N1,672.69.
Reflecting the market mood, investors demand was focused on the long end, with subscriptions totaling N1.45 trillion, which translated to a bid-to-offer ratio of 4.83x, according to CardinalStone Limited.
The apex bank ended up selling about N1.447 trillion at a stop rate of 24.28%, AIICO Capital Limited told investors in a note. Notably, all the volume was allocated to the long-end tenor with no subscriptions or allotments for the short and medium tenors.#Foreign Investors’ Appetite for Nigeria’s OMO Bills Increase#
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