The Central Bank of Nigeria (CBN) has successfully mobilized a total of N1.2 trillion from its recent Open Market Operations (OMO) and Nigerian Treasury Bills (NTB) auctions, executed last week as part of measures to control excess system liquidity.
The auctions, conducted at the primary market level, were aimed at absorbing surplus cash flow arising from matured OMO and Treasury bills that had earlier injected significant liquidity into the economy.
Market data revealed that the auctions recorded overwhelming demand from participants including local commercial banks, asset managers, foreign portfolio investors, and other institutional stakeholders. On Wednesday, the apex bank offered Nigerian Treasury bills valued at N230 billion, while the following day saw the floatation of OMO bills.
OMO Auction Oversubscription
At the OMO auction, the CBN issued N600 billion worth of short-dated instruments, split between 89-day and 124-day maturities. Subscriptions surged to N1.02 trillion, producing a strong bid-to-offer ratio of 1.69 times.
Investment analysts at Cowry Asset Management observed that more than N1 trillion of the bids targeted the 124-day tenor, underscoring investors’ appetite for slightly longer-dated papers to take advantage of higher yields.
The auction closed with a total allotment of N897.2 billion, with stop rates set at 25.50% for the 89-day bills and 25.99% for the 124-day papers.
Treasury Bills Auction Performance
The CBN also conducted its last NTB auction for August, floating N230 billion across the standard tenors of 91-day, 182-day, and 364-day.
According to the breakdown, N50 billion worth of 91-day bills, N30 billion of 182-day bills, and N150 billion of 364-day bills were put on offer. Demand remained robust, reaching N396 billion, with nearly 90% of the interest directed towards the one-year (364-day) maturity. This trend highlights investors’ strategy of locking in yields for longer periods to mitigate reinvestment risks.
The final allotment for the auction stood at N303.78 billion, with stop rates adjusting upwards to 15.35% for the 91-day tenor and 17.44% for the 364-day bills, while the 182-day maturity remained unchanged at 15.50%.
However, analysts noted that the bid-to-cover ratio dipped to 1.30 times, a decline from 2.12 times in the preceding auction, signaling a slight moderation in demand despite prevailing liquidity in the market.
Outlook
Looking ahead, the financial markets are bracing for another N350 billion in OMO maturities expected to hit the system this week. Analysts believe this development will sustain liquidity levels and continue to shape investor appetite in the fixed income market.
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