Market News

Nigeria’s central bank retained high double-digit yields on one-year papers favoured by offshore investors in an auction on Tuesday to sustain dollar inflows and shore up the naira.

The Abuja-based Central Bank of Nigeria sold the so-called 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.

The central bank may be deliberately keeping “OMO yields above 20% to maintain their appeal to offshore investors,” said Oyinkansola Samuel, an analyst at Rand Merchant Bank.

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 RMB estimating that 30% to 40% of the demand came from foreign investors, Samuel said.

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, said Samir Gadio, head of Africa strategy at Standard Chartered Plc. “The central bank has managed to attract significant portfolio inflows via the OMO route, which has helped anchor the naira.”