CBN mops up N2.5tn as OMO demand surges

The Central Bank of Nigeria absorbed about N2.5tn from the financial system through its latest Open Market Operations auction, intensifying efforts to manage excess liquidity in the banking sector.

The auction, conducted on Wednesday, attracted subscriptions of about N3tn, three times the N1tn the apex bank had initially offered across 69-day, 90-day and 153-day OMO bills.

The strong demand came amid elevated liquidity in the financial system, with investors showing greater appetite for the longer-dated instruments.

The CBN ultimately allotted approximately N2.5tn, significantly above its initial target, as it used the operation to withdraw funds from the market.

The bills were sold at stop rates below 20 per cent, reflecting the prevailing repricing in the fixed-income market.

The 69-day bill cleared at 19.25 per cent, while the 90-day and 153-day instruments were allotted at 19.05 per cent and 18.39 per cent respectively.

The latest operation comes as money market rates remain high, indicating continued pressure on banking-system liquidity despite the CBN’s ongoing liquidity-management operations.

The overnight rate rose marginally by two basis points to 22.20 per cent, while the Open Repo Rate remained at 22.00 per cent.

The movement in short-term funding rates suggests that liquidity conditions remained relatively tight following the CBN’s intervention, even as banks continued to adjust their positions in the interbank market.

The OMO auction is one of the key instruments available to the CBN for regulating liquidity and influencing short-term interest rates. By selling securities, the apex bank absorbs naira liquidity from banks and other investors, potentially putting upward pressure on money-market yields.

The latest auction also underscores investors’ continued demand for high-yielding short-term government-backed instruments amid elevated interest rates across Nigeria’s fixed-income market.