The Central Bank of Nigeria (CBN) allotted OMO bills worth N745 billion to investors at the end of its latest open market operation. The Apex Bank floated N600 billion at the primary market via competitive auction to mop up excess liquidity in the financial system.
The money market has been flooded with significant funds in the absence of Treasury bill actions last week.
Though the market experienced inflows from matured bills, leaving the liquidity balance in a positive net position. In response to elevated system liquidity, the CBN floated an OMO auction offering N600 billion across two tenors.
Investment firms reported that demand was decent, with a bid-to-offer of 1.3x. Ultimately, the CBN allotted N745.4 billion, selling only the longest-dated paper at a stop rate of 23.99%, CardinalStone Securities Limited said in an emailed note.
Analysts said the CBN allotment would reduce liquidity strength in the banking system ahead of anticipated inflows from OMO bills in the week. Last week, OMO bills segment saw firm buying interest, particularly at the long end of the curve, where yields dropped by 50 bps to 25.90%.
The short and medium ends recorded yield contractions of 2 bps and 12 bps to 26.14% and 27.19% pa., respectively, pulling the average OMO yield down to 26.41% pa. from 26.70% pa. the previous week, according to Coronation Merchant Bank research unit.
The financial system closed trading sessions with N1.58trn liquidity, up from N401.22 billion the week prior, largely due to FAAC inflows.