The average yield on Open Market Operation (OMO) bills declined by 9 basis points in the secondary market, settling at 22.4%, according to financial analysts. This drop was driven by increased investments from Nigerian banks and foreign portfolio investors (FPIs).
At its OMO auction last Thursday, the Central Bank of Nigeria (CBN) offered N600 billion in OMO bills in two different categories: N300 billion for bills with a 355-day maturity and another N300 billion for bills with a 362-day expiry.
Investors showed strong interest, with total subscriptions reaching N1.88 trillion, meaning demand was more than three times the available supply. The CBN eventually allocated N1.68 trillion worth of Open Market Operation bills—N725.7 billion for the 355-day bills and N951.2 billion for the 362-day bills.
Spot rates for these Open Market Operation bills also declined, aligning with the CBN’s strategy to reduce the cost of Nigeria’s debt. The stop rate for 365-day maturity Open Market Operation bills dropped from 23.95% to 19.19%, while the 362-day bill rate fell from 23.98% to 19.45%.
The CBN only conducted one Open Market Operation auction last month, indicating a conscious effort to loosen liquidity restrictions. In a market update, Erad Partners Limited stated that the demand for fixed-income assets was driven by the financial system’s continued liquidity, which resulted in a 400 basis point decline in yields due to the reduced frequency of Open Market Operation auctions.
