Foreign portfolio investors (FPIs) and Nigerian deposit money banks (DMBs) demonstrated renewed confidence in the Central Bank of Nigeria’s (CBN) monetary tightening stance as they collectively staked more than N4 trillion in the apex bank’s Open Market Operation (OMO) auction on Monday.
The auction, which sought to mop up excess liquidity from the financial system, recorded total subscriptions of N4.1 trillion, with the CBN eventually allotting N998.1 billion at an average stop rate of 20.1 per cent. The outcome underscores sustained appetite for high-yield naira assets among institutional investors seeking to hedge against inflation and exchange rate volatility.
Market analysts described the robust participation as a positive signal of policy credibility and a reflection of investor preference for short-term sovereign instruments amid tightening liquidity conditions. The strong demand also highlights improving confidence in CBN operations following recent monetary reforms designed to stabilise prices and attract capital inflows.
Despite the upbeat sentiment in the fixed-income segment, pressure persisted in the foreign exchange (FX) market, where the naira weakened to N1,475 per US dollar at the Nigerian Foreign Exchange Market (NFEM) following a spike in demand for foreign currency by eligible users.
The local currency has lost about N15 in the past two trading sessions, reflecting renewed FX demand pressures in the absence of direct market intervention.
A research note from Coronation Merchant Bank observed that activity levels at the NFEM window moderated slightly last week, as FX inflows declined to US$835.6 million, compared to US$1.18 billion in the preceding week.
By composition, foreign portfolio investors accounted for the largest share of inflows at US$259.11 million (30.1 per cent), followed by exporters (20.3 per cent), foreign direct investments (19.9 per cent), the CBN (14.9 per cent), non-bank corporates (8.9 per cent), and other sources (12.2 per cent).
Analysts noted that the tightening in liquidity, reinforced by the recent OMO sales, could help moderate speculative demand for dollars in the coming weeks, particularly as naira yields remain elevated and foreign investors deepen participation in the domestic debt market.
In a related note, the report stated that the gap between the official and parallel market rates narrowed to -N10.68 (a 0.73 per cent premium at the official window) from N14.34 a week earlier, suggesting a temporary easing of speculative activities after seasonal dollar demand linked to tuition payments and holiday travel tapered off.
Nume Ekeghe
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