The Nigerian financial market on Thursday resumed activities after the two-day holiday, with the Central Bank of Nigeria (CBN) mopping up a total of N170 billion from the system through its Open Market Operation (OMO).
OMO refers to the buying and selling of government securities, usually by the central banks, to control liquidity in the system.
The results of the OMO auction on Thursday showed that the short- and medium-term instruments were undersubscribed while the long-term tenor was oversubscribed.
A breakdown of the OMO auction results revealed that N20 billion was offered for 98 days to mature on September 12, 2019. The offer recorded total (under) subscription of N0.071 billion at 11.4 percent stop rates.
The N30 billion offered for 175-day tenor recorded a total of N2.13 billion subscription and sales at a bid range and stop rate of 11.63 percent. The offer, which will mature on November 28, 2019, was undersubscribed.
For the long-term instrument, the CBN offered a total of N120 billion for 364-day tenor, which was oversubscribed by N155.78 billion at the stop rate of 12.48 percent. The offer which matures on June 4, 2020 was earlier bid at a bid range of between 12.42 and 12.50 percent.
Ayodeji Ebo, managing director, Afrinvest Securities Limited, told BusinessDay that under-subscription of the short- and medium-term tenor instrument was as a result of the attractiveness of rates in the secondary market. He explained that the long-term instrument was more attractive than the last primary market auction.
Analysts at Afrinvest had earlier advised investors to take position in the expected OMO offering and stay alert for attractive medium-to-long-term bills available in the secondary market.
Overnight interbank rate, which is the rate at which banks borrow and lend short-term money to each other, on Thursday dropped to 9.21 percent, from 10.21 percent on Monday, June 3, 2019. Similarly, the Open Buy Back (OBB) closed at 8.29 percent, representing 1.00 percentage point compared to 9.29 percent it recorded on Monday.
In line with the contractionary monetary policy stance, CBN Bills were used as the major instrument for the conduct of OMO to manage the liquidity in the banking system.
The CBN’s annual activity report for 2018 showed that CBN Bills offered at the OMO auctions increased to N34.6 trillion compared with N13.7 trillion in 2017. The total subscribed during the same period increased to N24.9 trillion from N12.3 trillion in the preceding year, while the amount sold rose to N22.3 trillion in 2018 from N11.3 trillion in 2017.
The high level of activity during the review period was attributable to the increased number of auctions to moderate the excess banking system liquidity occasioned by the payments of statutory revenue to the three tiers of government, other fiscal disbursements and maturing CBN Bills, amongst others.
At the foreign exchange market, the nation’s currency closed at N360.67k per dollar, gaining 0.02 percent over N360.76k traded on Monday at the Investors & Exporters forex window before the holiday, data from FMDQ show.
Nigeria’s external reserves rose to $45.1 billion as at June 3, 2019, representing 0.67 percent compared with $44.8 billion as of May 3, 2019, data from the CBN website indicated.
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