The Open Market Operation (OMO) auction on Thursday recorded no sales as the Central Bank of Nigeria (CBN) failed to meet investors’ demand for higher rates.
The CBN offered a total of N150 billion to investors on three tenors comprising N130 billion for 362-day and N10 billion each for 180-day and 98-day tenors.
While there was no interest in the short-term OMO bill, investors subscribed to the medium and long-term bills to the tune of N2 billion and N16 billion, respectively.
The bid was at a range of 17-18.25 percent for the long-term bill and 16 percent for the medium-term bill but the OMO auction result obtained by BusinessDay showed no sales.
Ayodele Akinwunmi, relationship manager, corporate banking, FSDH Merchant Bank Limited, said the bid rates the market participants wanted to buy the OMO were high.
“And I suspect the CBN thought there was no justification for such high rates. Therefore, there was no sale. Remember that it is the CBN that pays for the cost of managing the liquidity using the OMO as an instrument. In the last few days, the rate at the secondary market has increased,” he said.
Akintunde Olusegun, financial market analyst at Polaris Bank Limited, said the level of subscription on the mid and long tenor was abysmally low while the range of bid was also very high. The CBN might have been uncomfortable with both parameters, he said. Total subscription on the 182-day bill was N2bn against N10bn that was offered while the total subscription on the 362-day bill was N16bn against N130bn that was offered. There was no subscription on the shorter tenor.
The low level of subscription is as a result of lack of interest on the part of the FPIs, analysts said. The current economic realities and secondary market rates were priced into the range of bids submitted by the few investors that bid. The sudden increase in rate at the secondary market was due to sell-off by FPIs who are running to safety on the back of the continued fall in oil price and the impact of coronavirus on global economy.
The foreign exchange market closed on Thursday with dollar appreciating by 67 kobo to an average rate of N376 from N376.67k per dollar traded in the morning at the black market.
The market was gripped with low activities as demand was gradually declining occasioned by travel restrictions by the Federal Government.
Investigation shows that dollar strengthened by N2 at Eko Hotel in Lagos to close at N376 from N378 in the morning.
However, it traded the same at N375 and N377 at the black market in Festac and Apapa axis of Lagos State.
NT-bills market ended the trading session on a positive note on Thursday, with average yields declining by 16 bps to 3.66 percent; the average OMO yields declined by 7 bps to 16.61 percent, according to a report by FSDH research.
The Overnight (O/N) rate declined by 5.30 percent to close at 5.90 percent on Thursday. Also, the Open Buy Back (OBB) rate declined by 5.20 percent to close at 5.20 percent.
A report by Afrinvest Securities Limited noted that last week Thursday, pockets of unfilled bids filtered into the market owing to improved system liquidity from OMO maturities (N223.7bn) coupled with no OMO auction sales by the CBN. Most of the demand was skewed to medium-term maturities, particularly the 12-Nov-20 (-81bps), 29-Oct-20(-63bps) and 15-Oct-20(-63bps) instruments. As a result, average yield across tenors dropped marginally to 3.9 percent from 4.0 percent the previous week.
Hope Moses-Ashike
