CBN Executes Three OMO Auctions, Lowers Stop Rates On Longer Tenors

The Central Bank of Nigeria (CBN) conducted three Open Market Operations (OMO) auctions last week, all of which recorded strong investor participation despite tightening liquidity conditions in the financial system.

At the first auction early in the week, the apex bank offered ₦600 billion across the 210-day and 350-day maturities. Investor demand was robust, with total subscriptions reaching ₦4.87 trillion. According to Coronation Merchant Bank Limited, demand was heavily skewed toward the longer tenor, which accounted for 82.69% of total bids.

However, no allotments were made at the auction, a move Cowry Asset Management Limited attributed to the CBN’s resistance to prevailing bid yields.

The CBN returned to the market on Thursday with another ₦600 billion offer, this time across the 208-day and 348-day maturities. Investor appetite strengthened further, with total subscriptions rising to ₦5.93 trillion—an increase of 22.83% compared to the previous auction.

Allotments at Thursday’s auction amounted to ₦3.79 trillion, translating to a bid-to-cover ratio of 1.57x and a bid-to-offer ratio of 9.88x, reflecting aggressive liquidity sterilization by the central bank.

Stop rates declined significantly, settling at 17.20% from 19.38% per annum on the 208-day instrument, while the 348-day bill cleared at 17.25%.

On Friday, the CBN conducted its third OMO auction of the week, offering ₦600 billion across the 207-day and 354-day maturities. Total subscription came in at ₦2.56 trillion.

No allotment was recorded on the 207-day bill, while ₦2.11 trillion was sold on the 354-day instrument at a stop rate of 17.25%.

System liquidity moderated during the week, closing at ₦1.87 trillion compared to ₦2.78 trillion previously, despite inflows of ₦2.14 trillion from OMO maturities.

Liquidity conditions tightened further as the CBN intensified its sterilization drive, with total allotments of ₦5.89 trillion across two of the three OMO auctions conducted during the week.

The sharp contraction in liquidity exerted upward pressure on money market rates. The overnight lending rate climbed to 26.36% from 22.79%, while the repurchase (repo) rate increased to 26.07% from 22.50%, reflecting tighter funding conditions across the interbank market.