CBN’s OMO Auction Draws N1.915tn with Lower Rates

The Central Bank of Nigeria (CBN) recently held an Open Market Operation (OMO) auction on February 13, 2025, which saw substantial participation from investors.

The auction attracted a total subscription of N1.915 trillion, reflecting continued confidence in the CBN’s liquidity management strategies. However, there was a noticeable drop in demand compared to the January 31, 2025, auction.

Despite the reduced demand, the CBN increased the volume of successful bids, selling OMO bills worth N1.395 trillion, representing a 39.5% increase from the N1 trillion sold in January.

In this auction, the CBN offered two subscription tenors: a 355-day bill and a 362-day bill, each with an initial offer size of N300 billion. Investor interest was higher for the longer 362-day bill, with total subscriptions reaching N1.499 trillion, far exceeding the amount offered. The 355-day bill garnered subscriptions of N415.85 billion, indicating strong interest despite being lower than the 362-day bill.

The CBN responded to this demand by increasing the total sales volume. It allotted N402.85 billion for the 355-day bill and N993 billion for the 362-day bill, bringing the total sales for the February auction to N1.395 trillion, a significant increase from the January auction’s N1 trillion.

Comparing the January 31, 2025, auction with the February 13 auction reveals significant shifts in market demand and yield trends. While February’s auction performed well, total subscriptions dropped by 33.86% from January’s N2.895 trillion to N1.915 trillion. The demand for the 362-day bill decreased from N1.959 trillion in January to N1.499 trillion in February, a 23.46% decline.

Despite the lower investor demand in February, the CBN increased the amount allotted from N1 trillion in January to N1.395 trillion in February, indicating a more aggressive liquidity mop-up strategy aimed at controlling inflation and stabilizing monetary conditions.

Another notable difference between the two auctions was the change in stop rates and bid ranges. In the January auction, the 347-day bill had a stop rate of 22.50%, while the 361-day bill cleared at 22.65%. In February, the stop rates for the 355-day and 362-day bills were 21.3249% and 21.45%, respectively, showing declines of 5.22% and 5.31%.

The bid ranges also narrowed. In January, the 347-day bill attracted bids between 22.22% and 23.38%, while the 361-day bill saw bids ranging from 22.25% to 23.48%. By February, the bid range for the 355-day bill was between 20.40% and 22.00%, and for the 362-day bill, it was between 20.45% and 22.44%, indicating a moderation in yield expectations.

These lower stop rates suggest that investors were willing to accept lower yields, likely due to expectations of monetary policy easing or improved liquidity conditions in the financial system.