NGN263.33bn expected OMO Inflow to Boost Liquidity Baring Mop up by CBN

• As OVN expand to 27.0%

BY BONNY AMADI

In the new week, barring any mop-up activity by the Central Bank of Nigeria (CBN)it is expected that NGN263.33 billion inflows from OMO maturities would likely boost system liquidity.

As a result of the expected liquidity lift, it is likely that Overnight Rate (OVN) which closed upbeat last week will likely taper, though marginally.

Last week, the overnight (OVN) rate expanded by 1bp w/w to 27.0 per cent, as debits for the OMO auction (NGN1.51 trillion) subdued system liquidity. Accordingly, system liquidity deteriorated, albeit remaining positive, settling at a net long position of NGN628.90 billion (compared to a net long position of NGN1.88 trillion in the previous week).

…NTB subscriptions settled higher at N1.31 trillion

Meanwhile, the Treasury bills secondary market was quiet last week, albeit with a bullish undertone, driven by market participants looking to fill unmet bids from the PMA.

Consequently, the average yield across all instruments declined by 3bps to 23.0%.

Across the market segments, the average yield declined by 4bps to 20.7 per cent in the NTB segment, while it advanced by 10bps to 25.8 percent in the OMO segment.

At last midweek’s NTB auction, the DMO offered bills worth NGN450.00 billion, consisting of NGN50.00 billion for the 91 Day, NGN100.00 billion for the 182 Day, and NGN300.00 billion for the 364Day bills.

Total subscription levels settled higher at NGN1.31 trillion, which was higher compared to the previous auction which settled at NGN1.17 trillion, indicating a bid-to-offer ratio of 2.9x against auction bill to offer that settled at 2.3x.

The auction closed with the DMO allotting exactly the total amount offered, comprising of NGN50.00 billion for the 91 Day, NGN30.03 billion for the 182 Day, and NGN369.97 billion for the 364 Day papers at respective stop rates of 17.98% (previous: 18.00%) for 91D, 18.50% (unchanged) for 182 D and 19.35% (previous: 19.56%) for 364D bills.

The CBN conducted an OMO auction on Monday 2 June, offering instruments worth NGN600.00 billion, made up of NGN300.00 billion for the 106D and NGN300.00 billion for the 232D.

The auction was met with strong demand with total subscription settling at NGN1.53 trillion and bid-to-offer of 2.5x, with the CBN allotting NGN1.51 trillion.

The allotments were made of up to NGN204.87 billion for the 106D and NGN1.31 trillion for the 232D at respective stop rates of 24.20% and 24.64%.

Looking ahead, in the new week, it is expected that the improved liquidity would drive the demand for bills, causing yields to decline further in the Treasury bills secondary market, albeit slightly.

Additionally, the DMO is scheduled to conduct an NTB PMA on Wednesday June 11 with NGN 81.84 worth of bills on offer. At the auction, it is likely the rate will slightly taper.