OMO demand moderates as CBN sells N2.6trn

The demand for the Central Bank of Nigeria’s (CBN) Open Market Operations (OMO) bills remained strong at the latest auctions but it slowed from recent highs, as the apex bank sold about N2.6 trillion.

This shows that liquidity in the system is easing but remains strong enough to sustain demand, signalling a shift from excess cash to more selective investor participation.

Data from the Central Bank of Nigeria show that total sales across the latest auctions stood at approximately N2.6 trillion, significantly above the combined offer, as investors continued to channel funds into high-yield, low-risk instruments.

At the March 30 auction, the CBN sold about N662.9 billion worth of 8-day bills and N85.2 billion of 99-day bills, while a longer 120-day instrument attracted strong demand with N992.5 billion allotted.

The following day, the bank sold N848.8 billion of 140-day bills, while only N5 billion was allotted on the 70-day tenor, reflecting selective investor participation across maturities.

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The moderation in demand comes after last week’s surge, when subscriptions rose to about N3 trillion on the back of strong inflows from maturing securities and coupon payments.

“System liquidity has remained broadly robust. The moderation observed this week likely reflects a partial absorption of excess funds or a reallocation into alternative instruments,” said Omobola Adu, fixed income analyst at CSL.

This means that while there is still significant cash in the financial system, part of the excess liquidity that drove the previous surge in demand has either been absorbed by the central bank or redirected into other short-term instruments.

Despite the slowdown in subscriptions, demand patterns suggest that liquidity remains supportive, though investors are becoming more selective.

Short-dated instruments such as the 8-day bill recorded strong uptake, while the wide gap between demand for the 140-day and 70-day tenors indicates a more cautious and strategic positioning by market participants.

Analysts say this reflects a market that is still liquid but adjusting to evolving conditions, as participants balance yield opportunities with flexibility.

“Demand for OMO bills is expected to remain strong given their low risk and attractive yields,” said Taiwo Kareem, an expert in the subject.

“Liquidity in the near term is likely to stay in surplus, supported by inflows from maturing OMO bills, treasury bills, bond coupon payments, and FAAC distributions,” he further explained.

He added that if liquidity remains elevated, investors may increasingly look to lock in yields across longer-dated instruments.

Read also: CBN sells 1yr OMO bills at record 21.5% to lure foreign inflows

The previous week’s demand surge was driven by elevated system liquidity, which rose to between N8 trillion and N9 trillion.

“The improved demand was influenced by increased interbank liquidity on the back of inflows from bond coupons and OMO maturities,” said Victor Ogundijo, referring to last week’s auction.

The CBN’s continued ability to sell above its initial offer underscores its use of OMO operations as a key tool for managing liquidity conditions in the financial system.

With liquidity still firm but showing signs of moderation, analysts say future auction outcomes will depend on the balance between incoming flows and the central bank’s liquidity management strategy.

“Demand dynamics will remain closely related to the interest rate environment. Should rates stay elevated, we expect strong participation to persist in upcoming auctions,” Adu added.