The Central Bank of Nigeria (CBN) conducted another Open Market Operation (OMO) auction on February 13, 2025, attracting significant investor participation.
Total subscriptions reached N1.915 trillion, indicating continued confidence in CBN’s liquidity management instruments.
However, compared to the January 31, 2025, auction, demand was noticeably lower.
Despite this, the central bank increased the total volume of successful bids, selling N1.395 trillion worth of OMO bills, a 39.5% increase from the N1 trillion sold in January.
February 2025 OMO auction breakdown
In the latest auction, the CBN offered two subscription tenors: a 355-day bill and a 362-day bill. Both instruments had an initial offer size of N300 billion each. Investor interest was stronger for the longer-duration 362-day bill, where total subscriptions soared to N1.499 trillion, far exceeding the amount on offer.
Meanwhile, the 355-day bill saw a relatively lower subscription level of N415.85 billion, though still oversubscribed.
The apex bank responded to this demand by increasing the total volume of sales. For the 355-day bill, the CBN allotted N402.85 billion, while for the 362-day bill, the total sold reached N993 billion.
This brought the total amount sold in the February auction to N1.395 trillion, marking a significant increase compared to the January auction, where only N1 trillion worth of bills were sold.
January vs February auctions
- A comparison between the January 31, 2025, OMO auction and the recent February 13 auction highlights notable shifts in market demand and yield trends. While the February auction had a strong showing, total subscriptions declined by 33.86% compared to the previous month. In January, the combined subscription for the two tenors was N2.895 trillion, significantly higher than the N1.915 trillion recorded in February. The demand for the 362-day bill saw the biggest drop, falling from N1.959 trillion in January to N1.499 trillion in February, representing a 23.46% decrease.
- Despite lower investor demand in February, the CBN increased the amount it allotted. In January, the total successful bids amounted to N1 trillion, while in February, this figure rose by 39.50%, reaching N1.395 trillion. This increase suggests a more aggressive liquidity mop-up strategy by the central bank, possibly aimed at controlling inflation and stabilizing monetary conditions.
- Another significant difference between the two auctions was the movement in stop rates and the bid range for each tenor. In the January 31, 2025, auction, the 347-day bill had a stop rate of 22.50%, while the 361-day bill cleared at a slightly higher 22.65%. In the February 13, 2025, auction, the 355-day bill had a stop rate of 21.3249%, while the 362-day bill settled at 21.45%, representing declines of 5.22% and 5.31%, respectively.
- Similarly, the range of bids showed a downward trend. In January, the 347-day bill attracted bids ranging between 22.22% and 23.38%, while the 361-day bill saw bid rates from 22.25% to 23.48%. By February, the bid range narrowed, with the 355-day bill receiving bids between 20.40% and 22.00%, while the 362-day bill saw bids ranging from 20.45% to 22.44%.
This indicates a moderation in yield expectations. These lower stop rates indicate that investors were willing to accept lower yields, possibly due to expectations of monetary policy easing or improved liquidity conditions in the financial system.
What this means
The lower subscription levels in February compared to January could suggest tightening liquidity conditions or a shift in investor allocation strategies.
- However, the CBN’s decision to increase the amount sold indicates that it is actively managing the money supply, likely in response to inflationary trends or foreign exchange market pressures.
- The decline in stop rates suggests that market participants are anticipating a stable interest rate environment, with reduced expectations of further monetary tightening by the central bank.
- Investor sentiment also appears to be focused on longer-duration instruments, as seen in the higher demand for the 362-day bill.
This could indicate a preference for locking in relatively high yields for an extended period, potentially as a hedge against future market volatility.
