CBN opens OMO market to individuals, companies, non-bank investors

By Firdaus Jibril

The Central Bank of Nigeria (CBN) has widened participation in its Open Market Operations (OMO), allowing individuals, corporate organisations and non-bank financial institutions to participate in the market through Deposit Money Banks.

The change is part of a review of the apex bank’s money-market operations aimed at improving liquidity management and strengthening the functioning of the financial market.

Under the revised framework, eligible individuals, companies and non-bank financial institutions can participate in both the primary and secondary OMO markets. Their transactions will, however, be carried out through Deposit Money Banks, which will submit bids and handle settlement on behalf of the investors.

The move gives a wider group of investors access to OMO securities and could provide individuals and businesses with another option for investing funds in short-term government-backed securities.

OMO is one of the instruments used by the CBN to manage liquidity in the financial system. Through the purchase and sale of securities, the apex bank can influence the amount of money available within the banking system.

The CBN also reviewed the conditions governing banks’ access to its Discount Window, removing some restrictions previously connected to banks’ participation in foreign exchange transactions and primary government securities auctions.

The Discount Window provides eligible financial institutions with access to liquidity from the central bank when they require additional funds.

The revised framework also restores the use of tenored Repo Operations, allowing the CBN to conduct repo transactions with maturities ranging from four to 90 days.

A repo allows an institution to obtain short-term funds against securities, with an agreement to repurchase the securities at a later date. The CBN’s financial-market data separately tracks repo, reverse repo and OMO activities as part of its liquidity-management operations.

The CBN said the changes are intended to improve the effectiveness of its monetary policy operations and strengthen liquidity management in the financial system.

However, the wider access to OMO does not mean that all participants can transact directly with the CBN. Eligible investors are required to go through authorised Deposit Money Banks for participation and settlement.

The apex bank also retained restrictions governing same-day access to some of its liquidity and OMO facilities.

The revised framework takes effect immediately, giving individuals, companies and other eligible non-bank investors a broader route into Nigeria’s money market.