Investors placed N8.62tn worth of bids for the Central Bank of Nigeria’s Open Market Operations securities in two days, as yields on the short-term instruments climbed as high as 19.90 per cent.
The strong demand enabled the CBN to raise N4.72tn through four OMO auctions conducted on 26 and 27 August, exceeding its combined advertised offer of N2tn.
The auctions covered maturities ranging from 96 to 152 days and show continued investor appetite for high-yielding naira assets amid substantial liquidity in the financial system.
The 132-day OMO attracted the largest volume of subscriptions, with investors bidding N3.48tn for N500bn offered by the apex bank.
The CBN subsequently allotted N2.18tn at a stop rate of 19.65 per cent.
The 152-day instrument generated another N3.29tn in bids against a N500bn offer, while N1.77tn was eventually allotted at 19.32 per cent rate.
Demand was comparatively lower for the shorter instruments, although both were oversubscribed.
The 96-day OMO attracted N1.07tn in subscriptions, with N160.46bn allotted at 19.85 per cent.
Similarly, the 97-day instrument received N783.49bn in bids and recorded an allotment of N613bn at 19.90 per cent, the highest stop rate among the four auctions.
The auction results showed an unusual yield pattern, with the longest-dated instrument clearing at a lower rate than the shorter bills.
Market participants appear to have shown a preference for locking in returns for longer periods, despite accepting lower annual yields.
The latest OMO sales came as billions of naira entered the financial system from maturing government securities.
Data from the CBN showed that N4.30tn in primary-market securities matured between 26 and 27 August.
A further N762.89bn was raised through primary-market sales on 27 August, leaving a net liquidity injection of about N3.54tn from the primary market.
By implication, rhe CBN’s N4.72tn OMO mop-up exceeded the liquidity released through maturities and fresh primary-market activity.
On this basis, the financial system recorded an estimated net liquidity withdrawal of about N1.19tn over the two-day period.
Despite the intervention, liquidity remained substantial.
Opening balances held by banks and discount houses rose from N169.55bn on 26 August to N223.89bn on 27 August before moderating to N194.76bn on 28 August.
The CBN’s Standing Deposit Facility also held N3.42tn as of 28 August, indicating that banks still had sizeable excess funds available for placement with the apex bank.
The latest auction stressed the role of high fixed-income yields in attracting institutional funds into government securities.
With OMO rates remaining close to 20 per cent, investors have continued to demonstrate strong appetite for instruments that offer high naira returns over short and medium-term maturities.
The latest N4.72tn absorption also adds to the N7.18tn the CBN mopped up through OMO operations in July.
The CBN’s decision to allow a broader category of eligible investors to participate in OMO securities has further widened access to the instruments.
“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 a Lagos-based fixed income analyst, Alia Odion.
