CBN withdraws N3.46tn through OMO, T-bills

Nigeria’s Central Bank absorbed N3.46tn from the financial system through its latest Open Market Operations and Treasury bills auctions, as investors submitted more than twice the amount offered despite unchanged T-bill stop rates.

 The auctions, conducted on 3 and 4 November, attracted combined subscriptions of N5.57tn against offers of N2.3tn, according to results released by the apex bank.

 The CBN allotted N2.95tn through OMO and N509.41bn through T-bills, bringing total allotments to approximately N3.46tn.

 The OMO auction accounted for about 85 per cent of the combined allotment, reflecting the central bank’s stronger absorption of liquidity through the instrument

 At the 3 November OMO auction, the CBN offered N1.5tn across 119-day, 126-day and 133-day instruments but received subscriptions of N3.52tn, representing 2.35 times the offer.

 The apex bank allotted N2.95tn, with demand concentrated in the 133-day instrument, which attracted N2.36tn, accounting for about 67 per cent of total subscriptions.

 Stop rates for the 119-day, 126-day and 133-day OMO bills stood at 17.77 per cent, 17.71 per cent and 17.67 per cent, respectively.

 The sizeable allotment represented a sharp increase from the 29 October auction, when the CBN sold only N244.93bn despite receiving N2.28tn in bids.

The 4 November T-bill auction also recorded strong investor demand, with subscriptions reaching N2.045tn against an offer of N800bn.

 However, the CBN allotted only N509.41bn, leaving approximately N1.54tn in bids unaccepted.

 The 364-day instrument dominated demand, attracting N1.994tn in subscriptions and receiving N461.84bn in allotments.

 The 91-day bill attracted N25.01bn in bids, of which N22.40bn was allotted, while the 182-day instrument received N25.83bn in subscriptions and N25.17bn in allotments.

 The latest allotment was significantly higher than the N71.16bn recorded at the 28 October auction, when the central bank rejected most investor bids.

 Despite the increase in subscriptions, the CBN maintained T-bill stop rates at their previous levels.

 The 91-day instrument cleared at 15.40 per cent, while the 182-day and 364-day bills settled at 15.79 per cent and 15.80 per cent, respectively.

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 Investors, however, demanded higher yields on longer-dated securities, with bids for the 364-day bill reaching 18.18 per cent, substantially above the accepted rate.

 Average yields increased by 43 basis points to 17.70 per cent on 3 November from 17.28 per cent on October 28.

 The three-month benchmark yield climbed by 130 basis points to 17.40 per cent, while the six-month benchmark increased by 122 basis points to 17.85 per cent.

 The difference between primary and secondary market yields, alongside higher OMO rates, highlights varying investor expectations across short-term government securities.

 The 126-day OMO stop rate of 17.71 per cent was 192 basis points above the 182-day T-bill rate of 15.79 per cent

 The latest OMO allotment comes against the backdrop of substantial liquidity in the banking system and expectations of sizeable inflows in November.

 Financial data showed that banks had more than N7.72tn in the Standing Deposit Facility on 3 November, indicating elevated excess liquidity.

 The liquidity position followed approximately N2.016tn in OMO maturities, partly offset by the central bank’s subsequent N2.95tn allotment.

 In September, the CBN sold N17.51tn in OMO securities against N10.89tn in maturities, resulting in a net liquidity withdrawal of N6.62tn.

 The apex bank also allotted N4.69tn at its September 29 OMO auction against an advertised offer of N2.5tn.

 At the 22 October auction, OMO allotments reached N2.63tn against an offer of N2tn, before falling sharply at the final auction of the month.

 The Financial Markets Dealers Association reported that banking-system liquidity increased by 56.75 per cent to N7.373tn in October as OMO absorption moderated.

 The association also projected N13.79tn in liquidity inflows during November, largely from OMO maturities, government allocations and Treasury bills repayments.

 Meanwhile, the Debt Management Office has raised approximately N1.82tn against N2.95tn offered across four T-bill auctions in the fourth quarter.