CBN Opens OMO Market to Individuals, Local Corporates

The Central Bank of Nigeria (CBN) has opened participation in its Open Market Operations (OMO) to individual investors, corporates and non bank financial institutions, a move traders say will increase demand for the instrument and potentially lower yields.

CBN in a circular issued on Wednesday titled “Review of Discount Window Restrictions and Open Market Operations Participation Framework” signed by the acting director, Financial Markets Department, Okey Umeano, the apex bank said eligible investors can now participate in both primary and secondary OMO markets through Deposit Money Banks (DMBs).

The move effectively expands the pool of investors that can access OMO securities, bringing individuals and corporates directly into a market that had previously operated within a more restricted participation framework.

The new framework is part of a broader review of the CBN’s market practices and developments across the foreign exchange, money and fixed income markets, as well as its framework governing access to the Standing Lending Facility (SLF), Tenored Repo Operations and OMO.

The circular, which takes immediate effect, requires all banks, authorised dealers and other market participants to ensure strict compliance. According to the CBN, “OMO participation (primary and secondary markets) shall be open to all eligible investors through Deposit Money Banks (DMBs). Eligible investors include individuals, corporates and non bank financial institutions.”

It stated that DMBs would continue to submit bids and settle transactions on behalf of their customers, adding that “the volume, tenor and frequency of OMO issuances shall continue to be determined by the CBN in line with prevailing liquidity conditions and monetary policy objectives.

The circular also reviewed existing restriction on participation in OMO auctions. Based on the review, participation by institutions accessing the Discount Window on the same day would remain in force, while restrictions on access to the Discount Window arising from participation in the Nigerian Foreign Exchange Market (NFEM) has been removed.

Similarly, restrictions arising from participation in the primary auctions of government securities have also been removed. The CBN said the differentiated approach was adopted following its review of existing market practices and developments in the foreign exchange, money and fixed income markets.

In another major change, the apex bank lifted the suspension of Tenored Repo Operations. It said it may now conduct repo operations across approved tenors ranging from four to 90 days.

According to the circular, the resumption of Tenored Repo Operations is aimed at supporting effective liquidity management, improving money market functioning and enhancing monetary policy implementation.

The restoration of the facility gives the CBN another instrument for managing liquidity within the financial system, with the duration of operations capable of ranging from four days to as long as 90 days.