HEDGE FUNDS PUSH OMO DEMAND ABOVE N4TN

Hedge funds and other investors seeking attractive returns have shown strong demand for the Central Bank of Nigeria’s Open Market Operations bills, with subscriptions reaching N4.26tn at the latest auction.

The strong interest came despite the CBN reducing the stop rates on both instruments offered at its August 26 auction.

The apex bank had offered N1tn across 97-day and 132-day OMO bills but received bids worth more than four times the amount available.

The 97-day bill attracted N783bn in subscriptions against an offer of N500bn, while the 132-day instrument received N3.48tn in bids for the same N500bn offer.

The CBN eventually allotted N613bn on the shorter-dated bill and N2.18tn on the 132-day instrument, bringing total allotment to N2.80tn.

The 97-day bill cleared at 19.90 per cent, down from 20.39 per cent at the previous auction, while its effective yield stood at approximately 21.02 per cent.

For the 132-day bill, the stop rate fell to 19.65 per cent from 20.01 per cent, with the effective yield estimated at 21.16 per cent.

Analysts said the strong demand shows that investors remain interested in naira assets offering high returns, particularly amid strong liquidity in the financial system and gradually declining nominal yields.

The heavier demand for the longer-dated bill also suggests that investors were willing to lock away funds for a longer period in exchange for a slightly higher effective return.

The CBN's decision to allot N2.80tn, almost three times the initial offer, highlights the scale of liquidity being absorbed from the financial system through OMO operations.

The latest auction indicates that competition for high-yielding government securities remains strong, even as the CBN continues to gradually lower nominal rates.