The Central Bank of Nigeria’s Open Market Operations auction saw poor demand on Friday despite offering a stop rate of 21.69 per cent, suggesting the market is pushing back against the current rate environment and the central bank’s pricing.

The auction, which was carried out on Friday, October 31, offered ₦300 billion each across a 46-day bill and a 60-day bill. The auction ended with a low total sale of ₦1.11 billion, despite a total offer of ₦600 billion and subscriptions of ₦359.28 billion at a stop rate of 21.69 per cent.

SSA economist at CardinalStone, Olaolu Boboye, suggested that the recent auction size indicates that the CBN does not want to sell long tenor bills because of the rollover risk.

The 46-day Bill, the shorter tenor, received only ₦74.10 billion in subscriptions; however, it saw no sale, with a Nil stop rate, indicating the bids received were likely too far from the bank’s acceptable price.

The 60-day bill, the longer tenor, also witnessed weak subscription of ₦285.18 billion, which was still less than the ₦300 billion offered.

Analysts at Rhodium Capital said that with investors demanding yields as high as 24.99 per cent for such short tenors, the CBN appeared reluctant to fill bids at chosen elevated rates.

The introduction of 46-day and 60-day bills, among the shortest OMO maturities in recent months, also influenced the market’s pricing behaviour, as participants sought a premium to justify exposure to ultra-short paper.

They provided an overall assessment of the auction’s tactical nature: “Overall, the auction outcome suggests the operation was more tactical than driven by funding needs. Given the decent liquidity backdrop and expected maturities in the coming days, investors may be positioning for another auction with more attractive tenors and potentially better yields. Unless the CBN adjusts its rate expectations or tenor structure, demand at the short end may remain selective,” they said.

Matilda Adefalujo, a fixed income analyst at Meristem, suggests that the CBN is trying to achieve this using OMO as a proper liquidity mop-up too, not just an investment instrument.

Liquidity has been really high in the system; it was ₦4 trillion before the federal government bond auction on Monday, and now ₦2 trillion as of Thursday.