By John Audu.
The Central Bank of Nigeria (CBN) conducted another successful Open Market Operation (OMO) auction on February 13, 2025, attracting total subscriptions worth N1.915 trillion. Although demand was lower compared to the previous auction in January, the CBN increased the total volume of successful bids, selling N1.395 trillion worth of OMO bills.
The auction featured two tenors: a 355-day bill and a 362-day bill, both with an initial offer size of N300 billion. Investor interest was stronger for the longer-duration 362-day bill, with total subscriptions reaching N1.499 trillion. The CBN responded by allotting N993 billion for this tenor, while the 355-day bill saw N402.85 billion allotted.
Compared to the January auction, the February auction saw lower stop rates, with the 355-day bill clearing at 21.3249% and the 362-day bill at 21.45%. This decline in stop rates indicates that investors are willing to accept lower yields, possibly due to expectations of monetary policy easing or improved liquidity conditions.
The CBN’s decision to increase the amount sold despite lower subscription levels suggests that it is actively managing the money supply, likely in response to inflationary trends or foreign exchange market pressures. The decline in stop rates also suggests that market participants are anticipating a stable interest rate environment, with reduced expectations of further monetary tightening by the central bank.
The strong demand for longer-duration instruments, such as the 362-day bill, indicates a preference for locking in relatively high yields for an extended period, potentially as a hedge against future market volatility. As the CBN continues to manage liquidity and inflation, investors will be watching closely for signs of monetary policy direction and its impact on the economy.
