CBN Sells One-Year OMO Bills at 23.7% to Lure Foreign Investors

The Central Bank of Nigeria (CBN) sold open market operations (OMO) bills at yields of 23.7% about 782 basis points higher than comparable-tenored notes issued on behalf of the government last month.

The yields on the government-backed treasury bills have been declining since the beginning of the year.

Only offshore investors and local lenders are allowed to buy OMOs.

The central bank of Africa’s most populous nation uses these instruments to attract dollar inflows and manage excess liquidity in the banking system, as foreign investors must convert their funds into local currency to invest in the papers.

The central bank sold 2.12 trillion naira ($1.38 billion) of the bills in the Tuesday auction, with Rand Merchant Bank (RMB) estimating that 30% to 40% of the demand came from foreign investors.

Portfolio inflows from foreign investors have helped sustain naira stability this year, after the currency lost about 43% of its value against the dollar in 2024.

Inflows into money market instruments like OMOs jumped 151% in the first quarter of the year to $5.2 billion, accounting for 92% of all inflows, according to data published by Nigeria’s statistics agency Tuesday.

Foreign investors can buy both OMOs and treasury bills, but they prefer OMOs because of the higher yields.