Again, Investors Snub 3-month T-Bills at OMO Auction

By Dipo Olowookere

The Central Bank of Nigeria (CBN) on Tuesday conducted the fourth consecutive OMO auction in an effort to mop up excess liquidity in the financial system.

During yesterday’s exercise, a total of N94.50 billion was removed from the system via the sale of treasury bills at the secondary market.

Like in the previous session, investors snubbed the debt instrument maturing in three months’ time despite the apex bank offering to sell N50 billion worth of the paper to them.

On Monday, when the central bank auctioned the short dated treasury bills, market players stayed away. Yesterday, at another OMO exercise, a similar situation occurred.

But for the 191-day bills, the CBN auctioned N50 billion worth of the note and received subscriptions worth N10.77 billion from investors, which it eventually sold at 13.50 percent, same rate as the previous session.

For the 324-day paper, the apex bank auctioned N150 billion worth of it, but got subscriptions valued at N83.73 billion, which it also eventually sold for 15 percent, same rate as the last.

The above breakdown indicated that the OMO sales of Tuesday were largely undersubscribed like in the previous exercise.

Meanwhile, at the money market yesterday, average rates pointed north despite CBN’s attempt to stem the excess liquidity via the sale of OMO securities.

For example, the Open Buy Back (OBB) rate went up to 8.67 percent from 6.67 percent, while the Overnight (OVN) rate rose to 9.50 percent from 7.67 percent.

System liquidity was consequently estimated to have closed on Tuesday at N187 billion, with funding rates likely to tick slightly higher on Wednesday as the CBN is expected to continue its aggressive liquidity mop up exercise via OMO auctions.