CBN mops up N3.69 trillion in single-day OMO auction

The Central Bank of Nigeria (CBN) executed one of its most aggressive liquidity tightening exercises of the year, absorbing N3.692 trillion from the banking system in a single Open Market Operations (OMO) auction.

An analysis of the auction results indicates that the central bank’s aggressive drive to rein in money supply met with massive investor enthusiasm.

The apex bank initially offered a combined N600 billion across 33-day and 138-day maturities, but total subscriptions soared to N3.692 trillion, representing an oversubscription of more than sixfold.

This intervention marks a stark shift in strategy from the previous auction, where the monetary authority exercised restraint by accepting just N116 billion out of N872 billion in total bids.

The overwhelming demand underscores a financial sector packed with investable funds looking for high-yielding government paper.

The 33-day short-term bills attracted N1.525 trillion against a N300 billion target, a 5.1x oversubscription with the apex bank clearing all bids at a marginal rate of 21.57%.

Meanwhile, the longer-dated 138-day bills drew even stronger interest, recording N2.168 trillion in bids against a N300 billion offer.

The central bank accepted all subscriptions for this longer maturity at a marginal rate of 19.97%.

By absorbing 100% of the bids rather than rationing them, the CBN demonstrated a clear policy stance aimed at extracting excess cash from the banking ecosystem to combat inflation.

The immediate fallout of this massive mop-up was visible in the banking system’s liquidity metrics. The Standing Deposit Facility (SDF), where commercial banks park overnight surplus cash, plunged from N6.103 trillion to N2.703 trillion over a 48-hour window, a contraction of more than 55%.

Similarly, opening liquidity balances within the banking sector fell by approximately 23% to N78.96 billion.

With the federal budget deficit projected at N20.12 trillion, largely reliant on domestic borrowing the central bank’s aggressive single-day intervention underscores its resolve to protect the local currency and anchor inflationary pressures.