By 
The Central Bank of Nigeria (CBN) has raised N4.72 trillion through Open Market Operations (OMO) auctions in two days, as investors submitted bids worth N8.62 trillion for the short-term securities.
The strong demand came as OMO yields climbed to as high as 19.90 per cent, reflecting continued investor appetite for high-yielding naira-denominated assets.
The CBN conducted four OMO auctions on August 26 and 27, with a combined advertised offer of N2 trillion. However, strong subscriptions allowed the apex bank to allot more than twice the amount initially offered.
The instruments had maturities ranging from 96 to 152 days, highlighting continued demand for government securities amid significant liquidity in the financial system.
132-day OMO attracts largest demand
The 132-day OMO recorded the highest subscription, attracting N3.48 trillion in bids against the N500 billion offered by the CBN.
The apex bank allotted N2.18 trillion at a stop rate of 19.65 per cent.
The 152-day instrument also attracted substantial demand, with investors submitting N3.29 trillion in bids against an advertised N500 billion.
The CBN eventually allotted N1.77 trillion at a stop rate of 19.32 per cent.
Demand was comparatively lower for the shorter-dated instruments, although both were significantly oversubscribed.
The 96-day OMO received N1.07 trillion in bids, with N160.46 billion allotted at 19.85 per cent.
Similarly, the 97-day instrument attracted N783.49 billion in subscriptions, resulting in an allotment of N613 billion at 19.90 per cent — the highest stop rate recorded across the four auctions.
The auction results produced an unusual yield pattern, with the longer-dated instruments clearing at lower rates than the shorter-term securities.
This suggests that some investors were willing to lock in returns for longer periods despite accepting comparatively lower annualised yields.
OMO sales tighten system liquidity
The latest OMO auctions came as substantial funds entered the financial system through maturing government securities.
CBN data showed that N4.30 trillion in primary-market securities matured between August 26 and 27.
At the same time, the Federal Government raised a further N762.89 billion through primary-market securities sales on August 27.
This resulted in a net liquidity injection of approximately N3.54 trillion from primary-market activities during the period.
The CBN’s N4.72 trillion OMO absorption therefore exceeded the liquidity released through maturities and fresh primary-market borrowing.
On this basis, the financial system recorded an estimated net liquidity withdrawal of about N1.19 trillion over the two-day period.
Despite the CBN’s intervention, liquidity conditions remained relatively strong.
Opening balances held by banks and discount houses increased from N169.55 billion on August 26 to N223.89 billion on August 27 before moderating to N194.76 billion on August 28.
The CBN’s Standing Deposit Facility also held N3.42 trillion as of August 28, indicating that financial institutions continued to have substantial excess funds available for placement with the apex bank.
High yields sustain investor appetite
The latest OMO auction highlights the role of elevated fixed-income yields in attracting institutional liquidity into government securities.
With OMO rates remaining close to 20 per cent, investors continue to show strong demand for instruments offering relatively high naira returns over short and medium-term maturities.
The latest N4.72 trillion OMO absorption also adds to the N7.18 trillion mopped up through OMO operations in July, reinforcing the CBN’s increasingly active liquidity-management stance.
The expansion of eligibility to a broader range of investors has also widened access to OMO securities and contributed to demand for the instruments.
Market attention is now turning towards September, with further government borrowing and OMO maturities expected to influence liquidity conditions.
“With another N700bn treasury bills auction scheduled and about N2.25tn in OMO maturities expected, liquidity management is likely to remain a key feature of the fixed-income market as September approaches,” said Lagos-based fixed-income analyst Alia Odion.
The developments suggest that the interplay between government securities issuance, OMO interventions and excess banking-system liquidity will remain important for monetary policy transmission, fixed-income yields and financial-market conditions in the coming weeks.
Comments