The Central Bank of Nigeria (CBN) raised a total of N804.85 billion at its Open Market Operations (OMO) auction on Monday, April 28, 2025, indicating that investor demand for high-yield assets remains strong despite persistent surplus liquidity in the banking sector and rising inflation forecasts.

The auction, which had total subscriptions of N1,057 trillion, resulted in a 111% oversubscription rate. While solid, demand was somewhat lower among investors for longer-term securities.

The auction included two long-tenor bills: 329-day and 350-day notes, each with a N250 billion offering. The extended 350-day bill drew remarkable demand, with N923.60 billion in subscribers, more than three times the amount available.

N698.60 billion was allotted at a stop rate of 22.73%, with bid rates ranging from 22.4990% to 22.9700%. The rising desire for longer-dated securities indicates that investors remain confident in Nigeria’s national debt, with interest rates expected to remain high soon.

The 328-day instrument, maturing on March 24, 2026, received a lesser response, with total subscriptions of just N133.25 billion, or 53% of the amount offered. The CBN granted N106.25 billion at a stop rate of 22.69%, indicating that investors were less enthusiastic with this somewhat shorter maturity. This pattern demonstrates a strong preference among market players for locking in yields over longer time horizons, fueled by predictions that interest rates will peak shortly before gradually declining.

This auction follows a strong sale on April 25, when the CBN raised N1,008 trillion due to a 102% oversubscription. Although the current auction raised a lower amount, the consistent oversubscription of the 350-day bill demonstrates the market’s continued appetite for high-yield, risk-free assets. As liquidity in Nigeria’s financial system continues to rise, the demand for these assets remains robust, with limited safe investment vehicles available.

The auction’s success comes at a time when Nigeria’s broad money supply is quickly expanding, with M3 climbing by 3.2% month on month to N114.22 trillion in March 2025, or a 24% year-on-year increase. This rise in liquidity has boosted demand for products such as OMO bills, which provide attractive yields. Furthermore, a 38.9% growth in net foreign assets (NFA) to N45.17 trillion suggests greater capital inflows, which would help to maintain market liquidity.

Despite this, inflation remains a major worry, with headline inflation expected to reach 24.23% in March 2025, fueled by rising food, transportation, and energy expenses. This ongoing inflationary pressure complicates the CBN’s attempts to manage liquidity and tighten monetary policy. With the central bank’s instruments such as the 50% Cash Reserve Ratio (CRR) and the 27.75% benchmark interest rate, liquidity sterilisation remains tough.

As CBN continues to employ OMO auctions to absorb surplus cash and anchor market interest rates, all eyes are on the next Monetary Policy Committee (MPC) meeting. Market players will be watching intently to see if the central bank raises interest rates or stays the course in the face of these challenging economic conditions.