The Central Bank of Nigeria (CBN) is offering N1.5 trillion in Open Market Operation (OMO) bills on Tuesday, stepping up its effort to drain surplus cash from the banking system. The auction comes as banks’ balances at the apex bank’s Standing Deposit Facility (SDF) remain above N5.9 trillion, according to Nairametrics, after climbing to more than N8 trillion last week.
OMO bills are short-term securities the CBN sells to banks and investors to take money out of circulation. By locking up excess naira liquidity, the central bank aims to reduce pressure on prices and on the exchange rate.
What is on offer today
According to Nairametrics, Tuesday’s auction targets N1.5 trillion, split equally at N500 billion across three tenors that run from roughly five months to about eleven months. Results are expected after the auction closes, and analysts will be watching whether the CBN again sells more than it offers, as it did last week.
The sale comes as the system braces for heavy inflows. Citing a weekly market report by FMDA, Nairametrics said about N2.45 trillion is expected to flow back to investors this week, of which about N2.3 trillion is from maturing OMO bills. Without fresh sales, that money would add to the cash already sitting idle in banks.
Last week’s heavy mop-up
The CBN was active at the start of November. At an OMO auction on 3 November, it offered N1.5 trillion but received bids worth about N3.52 trillion and sold about N2.95 trillion, according to Blueprint and THEWILL. Stop rates ranged from 17.67% to 17.77% across the 119-day, 126-day and 133-day bills.
A day later, the Debt Management Office’s Nigerian Treasury Bills auction drew about N2.05 trillion in bids for an N800 billion offer, but only N509.41 billion was allotted. THEWILL reported stop rates of 15.40% on the 91-day bill, 15.79% on the 182-day and 15.80% on the 364-day. Altogether, the two auctions removed about N3.46 trillion from the system, both outlets reported.
The CBN held a further OMO sale on Friday, 6 November, Nairametrics reported, with stop rates of 17.25% on the 179-day bill and 16.54% on the 270-day bill.
Why liquidity keeps rising
Despite the sales, SDF balances rose from about N6.97 trillion on 4 November to N8.31 trillion on 6 November, according to Nairametrics, before easing to N5.92 trillion on Monday after OMO settlements. Banks use the SDF to park money they cannot lend profitably elsewhere, and the high balances show how much idle cash remains in the system.
Large maturities of earlier OMO bills, government spending and statutory allocations have kept the inflows coming. Nairametrics described the CBN as turning aggressive in its efforts to absorb the surplus, noting that most of the cash returning to investors comes from the bank’s own maturing bills.
What it means and what comes next
For investors, the OMO rates of around 17% to 18% remain well above Treasury bill rates, which keeps demand strong. For the wider economy, the mop-up is meant to support the naira and keep inflationary pressure in check, though high rates also raise borrowing costs for businesses.
The DMO returns to the market on Wednesday, 11 November, with another N800 billion Treasury bills offer, Nairametrics reported, including N600 billion of 364-day bills. The CBN’s Monetary Policy Committee is also due to meet later in November, where liquidity conditions are likely to be on the agenda.
Sources: Nairametrics, Blueprint, THEWILL.
