Apex bank allots N2.60trn against N600bn offer as demand for high-yielding sterilisation instruments remains strong.
Demand for Open Market Operations (OMO) bills remained exceptionally strong on Thursday, with investors submitting bids worth N4.93 trillion for securities valued at just N600 billion, according to data released by the Central Bank of Nigeria (CBN).
The heavy demand came despite the apex bank allotting N2.60 trillion across the two instruments offered at the auction, more than four times the amount initially put on offer.
The latest auction further underscores the extraordinary appetite for OMO bills in 2026, as investors continue to favour the instruments for their relatively high yields amid elevated interest rates and abundant liquidity in the financial system.
The CBN offered N300 billion each in 103-day and 138-day bills.
The 103-day bill, which matures on November 24, 2026, attracted N1.268 trillion in subscriptions, representing more than four times the amount offered.
The apex bank ultimately allotted N450 billion on the instrument. Bid rates ranged from 19.90 per cent to 20.46 per cent, while the stop rate was fixed at 20.39 per cent.
Demand was considerably stronger for the longer-dated 138-day bill, which matures on December 29, 2026. The instrument attracted N3.658 trillion in subscriptions, more than 12 times the N300 billion on offer.
The CBN allotted N2.154 trillion on the 138-day paper, with bid rates ranging from 19.79 per cent to 20.10 per cent. Its stop rate was 20.01 per cent, translating to a true yield of 21.66 per cent.
Interestingly, the longer-dated instrument attracted nearly three times as many subscriptions as the 103-day bill, even though it cleared at a lower stop rate.
OMO yields remain significantly above NTBs
The wide gap between OMO and Treasury bill yields remains a major factor driving investor demand.
Using stop rates and comparing instruments with broadly similar maturities, the 103-day OMO bill's 20.39 per cent stop rate is about 409 basis points above the 16.30 per cent stop rate on the 91-day Treasury bill.
Similarly, the 138-day OMO bill cleared at 20.01 per cent, compared with 16.50 per cent for the 182-day Treasury bill, leaving a yield differential of approximately 351 basis points.
The gap has made OMO bills particularly attractive to investors seeking higher returns from relatively low-risk money-market instruments.
The investor base has also widened following the CBN's move to make OMO bills accessible to individuals and other eligible investors through commercial banks, rather than limiting participation primarily to institutional Money Market Dealers.
That broader access could further intensify demand for the securities, particularly while OMO yields remain above comparable fixed-income instruments.
Pressure on banks' deposit rates
The persistent attractiveness of OMO bills could also have implications for deposit pricing across the banking sector.
As investors gain access to higher-yielding sterilisation instruments, banks may face increased pressure to offer more competitive deposit rates to retain funds that could otherwise move into OMO bills.
Analysts expect this process to gradually influence pricing across the fixed-income market, potentially narrowing the substantial yield difference between Treasury bills and OMO securities over time.
The latest auction is also part of an aggressive liquidity-management cycle by the CBN.
Just a week earlier, the banking system received a net N5.21 trillion liquidity injection, including a single N2.48 trillion OMO repayment on August 11. The latest auction subsequently absorbed a significant portion of liquidity through fresh OMO issuance.
The development follows another N4.69 trillion that was mopped up through OMO auctions conducted on August 3 and 4, while more than N7 trillion was absorbed through OMO auctions in July alone.
Strong demand persists despite massive liquidity operations
The continued scale of subscriptions suggests that liquidity in the banking system remains sufficiently high to support strong participation, even after repeated large-scale sterilisation operations by the CBN.
The N4.93 trillion in bids received on Thursday represents more than eight times the total amount initially offered, highlighting the depth of investor demand for the securities.
With OMO stop rates now hovering around 20 per cent, the instruments continue to stand out in the domestic fixed-income market, particularly against Treasury bills offering materially lower returns at comparable maturities.
For investors, the combination of elevated yields and access through banks has positioned OMO bills as an increasingly important investment option in the current high-interest-rate environment.
For the CBN, however, the strong demand and repeated large allotments demonstrate that liquidity management remains a major feature of monetary operations as the apex bank continues to use OMO instruments to absorb excess funds from the financial system.