By Radarr Africa Business Desk
LAGOS, November 5 (Radarr Africa) – Allotments of Nigerian government securities fell 55.86 per cent to N9.501 trillion in October from N21.527 trillion in September, driven mainly by lower Open Market Operations (OMO) issuance, according to the Financial Markets Dealers Association (FMDA) October market report as reported by Nairametrics.
The total covers Nigerian Treasury Bills (NTBs), OMO bills and Federal Government of Nigeria (FGN) bonds. The N12.026 trillion decline was led by OMO bills, which fell 64.69 per cent to N6.182 trillion from N17.510 trillion. Treasury bills fell 45.86 per cent to N1.309 trillion from N2.418 trillion. FGN bonds were the only instrument to rise, gaining 25.70 per cent to N2.010 trillion from N1.599 trillion.
Demand weakened across the board, based on bid-to-cover ratios. NTBs recorded 2.19 times, down from 5.11 times in September, while OMO fell to 1.70 times from 3.69 times. FGN bonds were covered 1.00 time, down from 1.49 times, meaning subscriptions roughly matched the amount offered.
The report highlighted several auctions. At the October 14 treasury bill auction, about 74 per cent of bids went unallotted, and the one-year stop rate rose 5 basis points to 15.90 per cent. At the October 28 auction, the Debt Management Office (DMO) rejected about N1.84 trillion in bids and allotted N71.16 billion against N1.908 trillion in subscriptions, on an offer of N800 billion. At the October 19 bond auction, the DMO allotted about N1.2 trillion, compared with N748.64 billion in September, and the stop rate on the 16.79 per cent FGN September 2036 bond rose to 17.29 per cent.
Secondary market turnover across the three instruments fell 37.19 per cent to N25.754 trillion from N41.002 trillion, with OMO accounting for N16.755 trillion.
Yields moved higher. Nigeria’s 10-year bond yield rose 40 basis points to 16.63 per cent in October, which the FMDA attributed to softer auction demand “rather than a monetary policy adjustment”. Average secondary market treasury bill yields rose 28 basis points to 18.02 per cent, led by the nine-month bill at 18.71 per cent, and average FGN bond yields rose 23 basis points to 16.18 per cent. Average OMO yields fell to 18.88 per cent from 19.81 per cent. By contrast, Nigeria’s Eurobond yield fell 26 basis points to 7.32 per cent as of October 29.
On liquidity, the Central Bank of Nigeria (CBN) sold about N17.51 trillion in OMO securities in September against maturities of N10.89 trillion, a net withdrawal of about N6.62 trillion. In October it allotted N6.182 trillion against maturities of N9.051 trillion, a net repayment of about N2.87 trillion, the FMDA said. Banking system liquidity rose 56.75 per cent to N7.373 trillion.
The FMDA said foreign portfolio investors held more than $20 billion in Nigerian OMO securities, citing market sources.
The naira depreciated 0.87 per cent to N1,338.99 per dollar in October, despite CBN dollar sales of more than $3 billion, according to the report. The parallel market premium narrowed to N40.20 from N64.24, and foreign exchange reserves rose to about $55 billion.
The Monetary Policy Rate stayed at 23 per cent after a September cut, and the next Monetary Policy Committee meeting is scheduled for November, the report said. The FMDA projects N13.79 trillion in inflows in November as the CBN eases its OMO mop-up, and advised banks to lengthen portfolio duration selectively rather than chase higher yields. It noted that existing holders faced modest mark-to-market losses.
The association cited exchange rate developments and oil price risk linked to the Middle East among the risks to its outlook. It also noted that a $105.94 million Eurobond coupon falls due in November.
The FMDA said Nigeria’s spread over the US 10-year yield was about 11.70 percentage points, with the US yield falling 36 basis points to 4.93 per cent in October. Kenya’s 10-year yield rose 13 basis points to 12.53 per cent over the same period.
