Foreign investors shy away from CBN’s OMO auction. In the money market last week, exit of foreign investors impacted the Central Bank of Nigeria’s (CBN) www.cbn.gov.ng open market operation (OMO) as subscription was significantly under sold.
Analysts told MarketForces that 187-day instrument was abandoned in total with few pick up in 96 and 362-day windows.
Specifically, the CBN sold ₦190.8 billion worth of OMOs across the 96-and-362-day windows at marginal rates of 11.5% and 13.3% respectively.
Afrinvest in a review noted that the inter-bank rates also trended lower on the back of improved system liquidity to ₦888.5 billion given the net OMO inflows of ₦154.1 billion.
As a result, Open Buy Back and Overnight rates rose by 1.4% apiece to settle at 2.4% and 3.1% respectively.
On Thursday, the CBN conducted an OMO auction worth ₦400 billion to absorb liquidity following ₦344.9 billion OMO inflows.
“As with the previous week, subscription was underwhelming at 0.02x and 0.8x for the 96-and-362-day windows while there was no sale on the 187-day OMO”, Afrinvest said.
“In our view, the weak demand at the OMO auction reflects waning interest of foreign investors, due to uncertainties in the domestic economy and the recent downgrade of the country’s outlook by Moody’s”, analysts at Afrinvest positioned.
Meanwhile, in the secondary T-Bills market, performance was largely bearish as average yields across benchmark tenors rose 43 bps w/w to close at 7.9%.
Only the medium-term instrument recorded gains with yields down 8 basis points (bps) to 7.3%, the short-and- long term instruments recorded sell-offs with yields rising 22 bps and 114 bps to 7.3% and 9.2% respectively.
“As OMO maturities worth ₦532.7 billion hit the system this week, we believe the CBN will continue its liquidity management operations – OMO auctions”, Afrinvest’s analysts stated.
Analysts however noted that the current foreign investors’ apathy towards OMO instruments is a major concern.