By Stephen Simon
The Central Bank of Nigeria’s decision to cut its benchmark interest rate to 23 per cent has triggered a sharp increase in demand for Open Market Operations securities, with investors submitting N6.09 trillion in bids at the latest OMO auction.
The figure represents an increase of N3.06 trillion, or more than 100 per cent, from the N3.03 trillion recorded at the previous OMO auction on September 16, before the Monetary Policy Committee announced the rate reduction.
The latest auction came just two days after the CBN cut the Monetary Policy Rate by 350 basis points from 26.5 per cent to 23 per cent at its September 21–22 meeting.
The apex bank described the move as an operational reset designed to improve the effectiveness of monetary policy and support the transition towards an inflation-targeting framework. The CBN also recalibrated its Standing Facilities Corridor while retaining the Cash Reserve Requirement for deposit money banks at 45 per cent.
Investors’ stronger appetite for OMO securities is being driven partly by expectations that yields on naira-denominated fixed-income instruments will continue to decline following the rate cut.
The demand was particularly strong at the longer end of the market as investors sought to lock in available returns before further repricing takes place.
The development is consistent with movements already recorded in the Treasury bills market. At Wednesday’s auction, investors submitted N4.09 trillion for the 364-day Treasury bill, despite only N400 billion being offered. The stop rate fell to 15.89 per cent from 16.62 per cent at the previous auction.
The rate cut has also coincided with increased liquidity in the banking system. Money-market liquidity rose to N7.45 trillion, while banks’ deposits with the CBN through the Standing Deposit Facility reached N7.33 trillion on Wednesday, a seven-month high.
The development could have wider implications for investors, banks, businesses and savers as financial institutions begin adjusting to the lower benchmark.
Lower yields could reduce returns on short-term fixed-income investments, while cheaper funding conditions could gradually improve access to credit for businesses and other private-sector borrowers.
Fresh data published on Friday showed that private-sector credit rose to N84.6 trillion in August, representing 11 per cent year-on-year growth and the strongest annual expansion since December 2024.
The challenge for the CBN will be to ensure that the new monetary-policy framework supports economic activity without reigniting inflationary or foreign-exchange pressures.
For investors, the immediate development signals a changing fixed-income environment as the CBN’s 23 per cent policy rate begins to filter through the financial system.
