Nigeria: CBN Rejects N1.2 Trillion in OMO, Treasury Bills Bids Amid Rate Cuts

Investor demand for Nigeria’s short-term fixed-income instruments remains strong as the Central Bank of Nigeria (CBN) continues to attract both local and foreign investors. However, despite the heightened appetite from institutional investors, banks, and asset managers, the CBN rejected over N1.2 trillion in bids at its recent Open Market Operations (OMO) and Treasury Bills auctions, even as spot rates saw a downward adjustment.

Strong Investor Demand in Recent Auctions

During its latest primary market auctions, the CBN raised over N2.5 trillion within two consecutive days. The Treasury Bills auction on Wednesday saw a total offer of N650 billion across various maturities, but demand surged significantly, resulting in total subscriptions of N1.92 trillion. Amidst this excess liquidity, the CBN ultimately allotted N830.44 billion, exceeding the initial offer size by 28% while rejecting over N1 trillion in bids.

• Stop rates for the 182-day and 364-day bills declined by 25 basis points (bps) and 61bps, settling at 17.75% and 17.82%, respectively.
• The 91-day bill rate remained steady at 17.00%, reflecting investor preference for longer tenors.

OMO Auction Sees Strong Demand from Local and Foreign Investors

On Thursday, the CBN conducted an OMO auction, offering N600 billion across two long-dated maturities. The auction attracted significant interest from local deposit money banks and foreign portfolio investors, with total subscriptions reaching N1.877 trillion.

• The CBN allotted N1.677 trillion to eligible market participants while rejecting N200 billion in bids.
• Stop rates for the two OMO tenors settled at 19.19% and 19.45%, respectively.

Interest Rates Remain Positive Despite Rate Cuts

Despite declining stop rates, Nigeria’s real return on investment remains positive, as interest rates continue to exceed inflation. This trend highlights the CBN’s strategy of balancing liquidity management with efforts to sustain investor confidence in the fixed-income market.

As the financial landscape evolves, market participants are closely monitoring the CBN’s approach to monetary policy, regulatory compliance, and liquidity management, which will shape investment decisions in the coming months.