CBN Moderates OMO Bills Rate as Demand Spikes

**Offshore Investors Snub Short, Mid-Tenor Instruments

By Dipo Olowookere

The Central Bank of Nigeria (CBN) moderated the stop rate of its one-year OMO bill on Thursday as demand for the instrument significantly increased during the exercise.

The apex bank had offered for sale N250 billion worth of the bill to offshore investors, but when result of the subscriptions was announced, investors staked the sum of N360 billion on the maturity.

By the time the allotment was made, the central bank only sold N289 billion worth of the bill to subscribers with the stop rate marginally reduced to 13.28 percent from 13.30 percent of the previous session.

But Business Post gathered that the 12-month instrument was not the only one auctioned by the apex bank during the session. The CBN also offered for sale N20 billion worth of the 89-day bill and N80 billion worth of the 180-day instrument.

However, when the results were announced, the central bank said it received no bid for the two maturities and consequently declared a ‘No Sale’ for them.

The treasury bills space has not remained the same again since the apex bank stopped both local institutional and retail investors from participating in its OMO auctions effective end of last month.

The move was done to allow lending to the real sector of the economy by commercial banks, who were pumping funds in government securities at the detriment of businesses, which needed funds to grow.

The policy was also introduced by the banking industry regulator to attract more funds from foreign portfolio investors to increase inflows into the country’s external reserves.

In the primary market for T-bills, rates have continued to decline, hitting 5 percent last Wednesday and this week, another exercise is expected and observers have said the rates might still go down.

The central bank has been able to ease the treasury bills rate from nearly 20 percent about two years ago to the present level. The rates dropped to single digit last month and are expected to remain so for a long time.