The Central Bank of Nigeria has intensified its efforts to manage the money supply by conducting Open Market Operations (OMO) auctions, through which it sold N1.06 trillion in bills.
There was significant interest from investors, with subscriptions reaching N1.14 trillion, thus oversubscribing the bills.
The central bank managed to sell these bills at an unprecedented high of 21.5%, marking a record for the institution as it strives to tackle inflation and stabilize the exchange rate.
Key Insights
- The subscription-to-offer and bid-to-cover ratios were impressive, standing at 2.28x and 1.08x, respectively.
- For the 95-day bill, N75 billion was made available, with N37.05 billion being sold at a stop rate of 19%. The entire N37.05 billion on offer was sold.
- The 179-day bill also had N75 billion on offer, but saw a lower subscription of just N8.25 billion, with a stop rate of 19.5% and only N6 billion sold.
- The 361-day bill experienced the highest demand, with subscriptions amounting to N1.09 trillion against an offer of N350 billion.
- The central bank sold N1.013 trillion of these bills at a 21.5% interest rate.
The central bank recently sold over N2.5 trillion in Treasury Bills with the 364-day bill going for 19% per annum.
What This Means
The central bank’s aggressive OMO auctions reflect its proactive approach to controlling liquidity in the economy.
- By selling bills at high-interest rates, it aims to mop up excess money supply, which is crucial for combating inflation and supporting the exchange rate.
- The high interest rates also indicate the central bank’s commitment to making Nigerian securities attractive especially to foreign investors, thereby drawing in capital that can help stabilize the financial market.
- However, the disparity in subscription levels across different bill tenors suggests varying investor confidence and expectations about the country’s economic outlook.