CBN Crashes Dollar as Naira Rises

The Central Bank of Nigeria (CBN) has intensified its battle against excess liquidity, raising N4.72 trillion through Open Market Operations (OMO) auctions in two days as investors chased yields approaching 20 per cent.

The huge mop-up came after investors submitted N8.62 trillion worth of bids for the short-term securities offered by the apex bank on August 26 and 27, highlighting strong demand for high-yielding naira assets.

The CBN had advertised only N2 trillion across four auctions but ultimately allotted N4.72 trillion, more than double the amount initially offered.

Investors chase nearly 20% returns

The 132-day OMO recorded the strongest demand, attracting N3.48 trillion in subscriptions against the N500 billion offered. The CBN allotted N2.18 trillion at a stop rate of 19.65 per cent.

The 152-day instrument also generated substantial interest, receiving N3.29 trillion in bids for N500 billion on offer. The apex bank eventually allotted N1.77 trillion at 19.32 per cent. Shorter-dated instruments also attracted significant demand.

The 96-day OMO received N1.07 trillion in subscriptions, with N160.46 billion allotted at 19.85 per cent.

Meanwhile, the 97-day instrument attracted N783.49 billion in bids, leading to an allotment of N613 billion at 19.90 per cent, the highest stop rate recorded during the auctions.

Interestingly, the longest-dated instrument cleared at a lower yield than the shorter bills, suggesting that some investors were willing to lock in returns for longer periods despite accepting slightly lower annualised yields, Punch reports.

CBN absorbs more cash than entered system 

The latest OMO intervention came against a backdrop of substantial liquidity flowing into the financial system from maturing securities.

CBN data showed that N4.30 trillion in primary-market securities matured between August 26 and 27. At the same time, N762.89 billion was raised through primary-market sales on August 27.