The bank raised N7.49trn at auctions against N10.69trn in maturing securities
The Central Bank of Nigeria (CBN) repaid about N3.20 trillion more in maturing securities than it raised through Open Market Operations (OMO) and Nigerian Treasury Bills (NTBs) auctions in October.
The bank raised N7.49 trillion at auctions, while N10.69 trillion in securities matured between October 2 and 29, according to an analysis of CBN auction and maturity data. Fresh allotments therefore amounted to about 70 per cent of repayments.
The figures mark a shift from September, when the CBN absorbed a net N6.62 trillion through OMO operations alone.
Repayments exceed auction allotments
The CBN held three OMO auctions and three Treasury Bills auctions in October, allotting a combined N7.49 trillion. Investors submitted bids totalling N13.23 trillion, but the bank accepted about 57 per cent of them.
• OMO auctions raised N6.18 trillion against N6.71 trillion in identified maturities, leaving a net repayment surplus of about N527 billion.
• Treasury Bills auctions raised N1.31 trillion against N3.985 trillion in reported repayments, leaving a difference of about N2.68 trillion.
• Overall, repayments of N10.694 trillion exceeded fresh allotments by about N3.20 trillion.
At the October 28 Treasury Bills auction, the CBN allotted N71.16 billion against subscriptions of N1.908 trillion, leaving about 96 per cent of bids unfilled.
The October 6 OMO auction initially absorbed more funds than matured that day: the CBN allotted N3.309 trillion against repayments of N2.168 trillion. But further maturities of N2.409 trillion on October 13 and N2.133 trillion on October 27 shifted the monthly balance. The final two auctions raised just N316.10 billion against subscriptions of about N4.19 trillion.
SDF balances rise as yields fall
The slower pace of securities issuance coincided with high placements at the CBN’s Standing Deposit Facility (SDF) and declining short-term auction yields. Banks’ net SDF placements exceeded N6 trillion after the October 13 OMO maturity and remained substantial towards month-end.
SDF balances stood at N8.41 trillion on October 28, then fell to N7.63 trillion on October 29 and N7.19 trillion on October 30.
Short-term yields also eased. The stop rate on a 138-day OMO instrument fell to 17.63 per cent on October 22, from 20.01 per cent for a comparable tenor on August 13. A 180-day OMO instrument cleared at 17.14 per cent, while the 364-day Treasury Bill stop rate fell to 15.80 per cent on October 28. At the October 6 OMO auction, stop rates were 17.22 per cent for the 147-day instrument and 16.92 per cent for the 182-day instrument. The decline in comparable OMO stop rates between August and October was 238 basis points.
The movements followed the Monetary Policy Committee’s September decision to cut the Monetary Policy Rate to 23 per cent. Lower yields may reduce returns on newly purchased securities, while existing fixed-rate instruments may rise in market value.
Analysts differ on liquidity impact
Aruna Kebira, chief executive of Globalview Capital Limited, described the higher repayments as positive, saying they reduced the CBN’s outstanding obligations.
He suggested the repayments might also reflect efforts to support liquidity after strong subscriptions to the Dangote Refinery public offer, while noting that the CBN’s intentions could not be independently confirmed.
“Based on the figures you have provided, it means the CBN is paying out more than it is raising. That should be commended because it reduces its outstanding obligations,” Kebira said. “It is possible that the higher repayments are partly intended to provide liquidity to the system after the substantial funds committed to the Dangote IPO.”
Kebira said the refinery’s N2.15 trillion offer, reportedly subscribed three times over, implied demand of about N6.45 trillion. He cautioned, however, that this did not necessarily represent the amount permanently withdrawn from domestic liquidity.
Olubunmi Ayokunle, head of financial institutions ratings at Agusto & Co., offered a different view of the repayments’ effect on the market.
“For monetary policy purposes, the instrument you should focus on is OMO,” Ayokunle said. “A significant proportion of the holders of those OMO securities are foreign investors. Therefore, the repayments do not necessarily translate into an equivalent injection of liquidity into the domestic economy.”
Ayokunle noted that Treasury Bills are issued on behalf of the Federal Government, while OMO is a discretionary monetary policy tool used by the CBN. He also said IPO subscriptions generally move funds between bank accounts rather than remove them from the financial system altogether.
October figures do not capture all liquidity flows
The estimated N3.20 trillion repayment surplus reflects the difference between specified securities maturities and fresh allotments. It is not a comprehensive measure of changes in domestic liquidity.
Government disbursements, foreign exchange interventions, currency movements and other banking transactions can all affect liquidity. A fall in SDF balances also does not necessarily mean that an equivalent amount has gone into lending to businesses and households. Repayments to foreign investors may have a different effect on domestic liquidity from repayments to local financial institutions.
Selective Treasury Bills allotments could help contain government borrowing costs, but continued under-allotment may require adjustments to other sources of fiscal financing. Large-scale OMO sales could also reverse the downward pressure on short-term yields.
The distinction between OMO and Treasury Bills is important when interpreting October’s figures: the instruments serve different purposes, and their repayments do not have identical effects on domestic liquidity. For banks and investors, the period was marked by both high SDF balances and lower yields on newly issued short-term securities. Whether those conditions continue will depend on future OMO auctions, government financing needs and the CBN’s assessment of inflation and financial-system liquidity.
