In a significant move, the Central Bank of Nigeria (CBN) successfully raised N2.93 trillion through Treasury Bills (T-Bills) and Open Market Operation (OMO) auctions, fueled by strong investor demand. T-Bills, short-term government securities, are issued to raise funds for the government, while OMO bills are issued to control liquidity in the economy. The CBN offered N400 billion in T-Bills at the midweek Nigerian Treasury Bills (NTB) auction, attracting a remarkable N1.54 trillion in subscriptions, with a bid-to-offer ratio of 3.9 times. As a result, the CBN over-allotted N714.38 billion, primarily focusing on the 364-day paper.
Similarly, at the OMO auction on April 25, the CBN offered N500 billion in instruments across two tenors, attracting subscriptions of N1.39 trillion, resulting in a bid-to-offer ratio of 2.8 times. The central bank allocated N1.01 trillion to investors, reinforcing the market’s strong appetite for short-term, high-yield government securities. Combined, the T-Bills and OMO auctions raised a total of N2.93 trillion within the week, highlighting robust demand despite global financial tightening and local liquidity challenges.
The demand for these instruments is attributed to excess liquidity in the banking system and a risk-averse stance among institutional investors. Although inflation-adjusted real returns remain negative, nominal yields are attractive compared to other investment options. Experts anticipate a potential slowdown in demand for short-term instruments in the near future as liquidity tightens, which may lead to an increase in yields. The CBN’s hawkish approach to monetary policy is expected to further influence short-term yields, as it continues to fight inflation.
Market observers view the CBN’s consistent involvement in the short-term debt market as critical for managing inflation and stabilizing the naira. The central bank’s role in financing government obligations and controlling liquidity remains pivotal in navigating economic challenges and maintaining investor confidence in the domestic financial markets.
Source: The Sun