Foreign Investors Snub CBN’s OMO Auction

Foreign investors were absent from the Central Bank of Nigeria’s latest Open Market Operations (OMO) auction which held on Thursday.

There were zero bids for each of the OMO bills slated for sale by the apex bank.

in a report by Nairametrics, it stated that the Central Bank had about N140 billion on offer via the restricted Open Market Operations divided into N10 billion for 89-day and 180-day bills respectively and another N130 billion for a 362-day bill.

The 362-day bill was offered at a range of bid of between 17% to 18.25%.

The CBN has over the last two years relied on selling OMO Bills to foreign and local portfolio investors at very high rates using it as a pseudo sterilizer of the naira and attracting the much needed foreign currency brought into the country by foreign portfolio investors.

Since then OMO Bills have ballooned to an N18 trillion market until the CBN said it has had enough late 2019.

Data from the National Bureau of Statistics also shows inflow into money market instruments grew from $3.2 billion and $8.4 billion in 2017 and 2019 respectively to a whopping $13.4 billion in 2019.

The bank banned everyone except foreign investors and banks from accessing the OMO market all in a bid to push drive funds away from risk-free CBN securities to more risky assets that it believed had a more positive effect on the economy.

The move left asset managers with trillions of naira hanging in the dry pushing them to the treasury bills market as they searched for alternative risk-free investments.

Since the ban, foreign portfolio inflow into money markets fell from $3.5 billion in the second quarter of 2019 to $2.5 billion and $1.4 billion in the third and fourth quarter of 2019. It was $5.8 billion in the first quarter of 2019.

However, it appears the global market sell-offs have left foreign investors with no choice but to exit emerging markets drying up any future security sale.

Nigeria’s Eurobond yields are now selling for as high as 13.4% for the bond maturing 2025 due to widespread drop in bond prices. Bond prices have an inverse relationship with yield. If a bond prices go down the yield goes up and vice versa.