Nigeria’s monetary authorities have set the stop rate for 167-day Open Market Operation (OMO) bills at 18.77%, following a fresh auction aimed at tightening liquidity in the financial system.
Data from the auction results show that the Central Bank of Nigeria conducted an OMO sale on Wednesday, raising N1.1 trillion from market participants. The liquidity mop-up exercise comes amid persistently high system liquidity levels, despite previous tightening measures.
Liquidity Conditions Remain Robust
Money market indicators point to sustained liquidity across the banking system. The overnight lending rate declined by 48 basis points to close at 22.25%, underscoring the availability of funds within the interbank market even as the apex bank intensified its sterilization efforts.
The financial system opened the trading session with excess liquidity estimated at N3.52 trillion. This surplus position necessitated the Central Bank’s intervention through OMO issuance, targeting both domestic banks and foreign portfolio investors eligible to participate in the auction window.
OMO Auction Structure and Offer Details
At the auction, the CBN introduced three maturities spanning short- to medium-term durations. Specifically:
- N200 billion worth of 6-day OMO bills
- N200 billion worth of 104-day OMO bills
- N200 billion worth of 167-day OMO bills
In total, N600 billion was initially offered across the three maturities.
However, aggregate demand significantly outpaced supply, with total subscriptions reaching N1.93 trillion. This level of demand reflects sustained investor appetite for high-yield fixed-income instruments amid prevailing monetary tightening conditions.
Subscription Breakdown by Tenor
A closer review of demand allocation reveals divergent investor interest across maturities:
- 6-day bills attracted N5 billion in subscriptions
- 104-day bills recorded N10 billion in bids
- 167-day bills drew a substantial N1.09 trillion in demand
The overwhelming interest in the 167-day tenor suggests that investors are positioning further along the short-to-mid segment of the curve to lock in attractive yields, while maintaining moderate duration exposure.
Stop Rates and Allotment Outcome
Despite the N600 billion initial offer size, the CBN ultimately allotted N1.1 trillion across the standard maturities, reflecting its intention to absorb a larger portion of excess liquidity from the system.
The stop rates cleared as follows:
- 6-day OMO bills: 21.94%
- 104-day OMO bills: 18.45%
- 167-day OMO bills: 18.77%
The pricing outcome indicates a relatively steep short-end yield, with the ultra-short 6-day paper clearing at the highest rate. Meanwhile, the 167-day paper’s 18.77% stop rate highlights the apex bank’s continued reliance on attractive yields to drive participation and enhance liquidity absorption.
Market Implications
The strong subscription levels and the eventual N1.1 trillion allotment signal that system liquidity remains ample. Even with aggressive liquidity sterilization, financial institutions continue to hold significant deployable funds.
For foreign portfolio investors, elevated OMO yields may enhance Nigeria’s carry trade appeal, particularly in an environment of tight global monetary conditions. For domestic banks, participation in OMO auctions provides a relatively secure avenue for parking short-term liquidity at competitive rates.
With excess liquidity still above N3 trillion at market open, further OMO interventions could be anticipated if liquidity conditions remain elevated. Market participants will also closely monitor money market rates and treasury yield movements to gauge the effectiveness of ongoing monetary tightening efforts.
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