The Central Bank of Nigeria (CBN) conducted an Open Market Operations (OMO) auction on April 29, 2025, successfully raising N804.85 billion amidst a backdrop of high inflation and excess liquidity in the financial system. This substantial sum, while impressive, was slightly lower than the N1.008 trillion raised in the preceding auction held just four days prior. The auction witnessed significant investor interest, with total subscriptions reaching N1.057 trillion, indicating an oversubscription rate of 111%. This robust participation underscores the continued attractiveness of high-yield government securities in an environment characterized by inflationary pressures and a search for stable investment opportunities. The CBN’s offering consisted of two long-tenor instruments: a 329-day bill and a 350-day bill, each valued at N250 billion.
Investor preference clearly tilted towards the longer-dated 350-day bill, attracting a massive N923.60 billion in subscriptions, more than three times the offered amount. This strong demand reflects investor confidence in Nigeria’s sovereign debt and an anticipation of sustained high interest rates in the foreseeable future. The CBN allotted N698.60 billion of the 350-day bill at a stop rate of 22.73%, with bid rates spanning from 22.4990% to 22.9700%. This strong performance mirrored the previous auction, where a similar long-dated instrument garnered substantial interest. The consistent demand for longer-tenor securities reinforces market expectations of a sustained hawkish monetary policy stance by the CBN, aiming to curb inflation and stabilize the Naira.
In contrast, the 329-day bill received significantly less interest, with subscriptions totaling N133.25 billion, only slightly over half of the offered amount. The CBN allotted N106.25 billion at a marginally lower stop rate of 22.69%, with bid rates between 22.3200% and 22.8900%. This disparity in demand highlights a clear investor preference for maximizing yields by opting for the longest available tenors, a trend observed across recent auctions. The muted interest in the shorter-dated bill contributed to the overall lower amount raised in this auction compared to the previous one, despite the continued strong appetite for the 350-day bill.
The April 29th auction followed a record-breaking sale on April 25th, where the CBN raised N1.008 trillion, exceeding the offered amount by a significant margin. This robust performance was fueled by the same strong demand for longer-dated bills. While the subsequent auction did not reach the same heights, the oversubscription of the 350-day bill underscores the persistent demand for risk-free, high-yield assets amid surging liquidity and limited alternative investment options. This scenario further highlights the challenges faced by the CBN in managing liquidity and controlling inflation.
The increased demand for OMO bills coincides with a period of rapid expansion in Nigeria’s broad money supply (M3). According to CBN data, M3 grew by 3.2% month-on-month to N114.22 trillion in March 2025, and by a substantial 24% year-on-year. While net domestic assets contracted, net foreign assets surged significantly, primarily driven by increased capital inflows and a build-up of external reserves. This influx of foreign capital further contributes to the excess liquidity in the financial system, complicating the CBN’s efforts to tighten monetary policy.
Despite implementing a high Cash Reserve Ratio (CRR) of 50% and maintaining a benchmark interest rate of 27.75%, the CBN continues to grapple with elevated liquidity levels. These measures, designed to curb inflation, face challenges due to the persistent influx of liquidity. Concurrently, headline inflation accelerated to 24.23% in March 2025, further emphasizing the urgency of addressing inflationary pressures. Rising food prices, transport costs, and energy costs contribute to the erosion of consumer purchasing power, adding complexity to the CBN’s inflation-fighting strategy. In this context, OMO auctions have become a crucial tool for the CBN to manage excess liquidity, influence short-term interest rates, and signal its monetary policy stance. These auctions also serve to moderate speculative pressures in the currency and equity markets, contributing to overall financial stability.
