Hunger for One-Year OMO Bills Drops at CBN Auction

By Dipo Olowookere

The appetite for one-year bill of the Central Bank of Nigeria (CBN) reduced at the Open Market Operations (OMO) conducted on Thursday.

The apex bank held its weekly OMO auction and from observation, the usual hunger offshore investors have for the 12-month instrument waned during the exercise.

Business post reports that N130 billion worth of the bill was offered for sale to traders, but the CBN only received bids valued at N107.80 billion at the end of the exercise.

In the past exercises, the apex bank would have received triple of the amount it auctioned to market participants, but yesterday’s OMO sale was never so as attention moved to another tenor.

The bills were offered in three tenors; 82-day, 180-day and 362-day and like in the previous auctions, only two caught the interest of investors, who were not impressed with the stop rates the bank was offering them for the short-date bill.

Consequently, the central bank declared a ‘No Sale’ for the 82-day tenor because it did not receive bids for the maturity, which had N10 billion for grabs.

However, foreign portfolio investors were more interested in the 180-day instrument, which received double of what the CBN intended to sell at the session. At the auction, the apex bank offered N10 billion worth of the mid-dated bill for sale, but subscribers staked N20.40 billion on it.

At the close of the exercise, the CBN allotted the N20.40 billion worth of the 180-day bill it received at a stop rate of 11.60 percent, while N107.80 billion worth of the 362-day bill was allotted to investors at 13.05 percent.

Meanwhile, at the money market yesterday, the average rates went down significantly by 8 percent to settle at 6.84 percent on the back of the 8.17 percent decline suffered by the Open Buy Back (OBB) rate and the 7.83 percent loss declared by the Overnight (OVN) rate.

At the close of transactions on Thursday, the OBB rate dropped to 6.17 percent from 14.33 percent, while the OVN rate fell to 7.50 percent from 15.33 percent.

It is important to state that the N310 billion in OMO maturities yesterday impacted system liquidity, which caused the market rates to crash.