CBN's Policy on OMO Bills Spurs Demand in the Nigerian T-Bills Market


Monday, November 04, 2019   /01:20 PM  / By Afrinvest Research / Header Image Credit: Proshare


In line with our expectations, demand on the Nigerian Treasury Bills ("NT-Bills") surged further in the primary and secondary markets last week as the impact of the CBN's policy on Open Market Operation ("OMO") bills reined in on available money market investment options. We recall that the Apex bank directive limits the purchase of OMO bills in the primary and secondary market to foreign investors, thus prompting local investors, especially the PFAs, to search for alternatives such as NT-Bills and FGN Bonds.


Coupled with investors bias towards this policy, robust system liquidity levels (c. N381.0bn as at Friday) buoyed demand amidst the Primary Market Auction ("PMA") on Wednesday as well as the CBN intervention at the OMO auction on Thursday. As a result, average yield across tenors declined by 36bps W-o-W to settle at 12.4% last Friday. Notably, major buying interests were witnessed at the medium and long dated tenors, particularly, 16-Jul-20 (-217bps), 11-Jun-20 (-158bps) and 1-Oct-20 (-155bps) maturities.


At the PMA, the Apex bank offered N132.5bn worth of T-Bills as against the N565.6bn total subscription, translating to a bid to cover ratio of 4.3x (vs. the 5.2x recorded at the previous auction). All tenors were oversubscribed with the 182 and 364-day instruments enjoying the most buying interest relative to available offer at 4.7x bid to cover ratio. Subsequently, the stop rates across all tenors declined by 130bps, 55bps and 144bps respectively.


Please see a detailed summary in the table below:

Auction Date




Allotment / Issue Date








Offer Amount (N)




Total Subscription (N)




Allotment (N)




Range of Bid Rates (%)

9.2500 - 11.0000

10.3000 - 15.0000

10.5000 - 14.0000

Stop Rates (%)




Previous Stop Rates (%)




Bid-to-Cover Ratio




Allotment Ratio





In addition, the CBN conducted an OMO auction on Thursday, offering a total of N330.0bn across the 96day, 187day and 362day instruments. The short and medium tenor instruments were undersubscribed at 0.3x and 0.2x respectively while the longer tenor bill was oversubscribed at 1.8x. Consequently, the Apex bank allotted a total of N363.09 across all three tenors with stop rates clearing at 11.6%, 11.8% and 13.3% respectively.

Going into this week, we expect the momentum in demand to be sustained due to the volume of unfilled bids at the PMA last week as well as inflows from maturing OMO bills (N351.7bn) which will further bolster liquidity. We expect the CBN to maintain its pace of liquidity mop-ups to keep system liquidity in check. Furthermore, we note that new OMO issuances will now mature on Tuesday rather than Thursday as the CBN aims to help investors differentiate between OMO bills and NT-Bills in the money market. 


Retail investors and local corporates are advised to trade cautiously and position in NT-Bills with attractive yields as we expect yields to continue to decline on the back of increased demand. Nonetheless, N-T-Bills rates remain attractive relative to other money market investments due to the tax free and upfront interest.


FGN Bonds Market Update: Renewed Interests from Local investors Causes Average Yield to Decline 83bps W-o-W 

In the bonds space, performance mirrored the T-Bills market as the CBN's policy on OMO spurred renewed demand from local investors particularly on shorter-term bond instruments during the week. As a result, average yield shed 83bps W-o-W to settle at 13.2% from 14.0% the previous week. Major buying interests were recorded on the shorter-term instruments particularly, the 23-Mar-25 (-134bps), 27-Jan-22 (-123bps) and 15-July-20 (-114bps) maturities.


Going into this week, The Debt Management Office ("DMO") is scheduled to auction the 2 and 3-year tenor FGN savings bond for the month of November from Monday (04-Nov-19) through Friday (08-Nov-19) at 10.296% and 11.296% respectively.


Furthermore, we expect the spillover effect of the CBN's policy to continue stimulating demand in the bonds market (especially bonds with 2-3 years "Time till Maturity"-TTM) as investors seek alternatives with higher Yields. Thus, investors are advised to take advantage of the short-term bonds (TTM of 2-3 years) due to their higher yields relative to long term NT-Bills.


Proshare Nigeria Pvt. Ltd.

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    Proshare Nigeria Pvt. Ltd.

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