Nigeria's Central Bank reverses OMO restriction, opens market to local investors

The Central Bank of Nigeria (CBN) has lifted a seven-year ban on local investors' participation in Open Market Operations (OMO), signaling a significant shift in monetary policy. Introduced in 2019 to curb pressure on the Naira, boost real sector lending, and lower interest rates, the restriction is now reversed.

Under the revised framework, individuals, corporates, and non-bank financial institutions are now eligible to participate in both primary and secondary OMO markets. These transactions will continue to be facilitated through Deposit Money Banks (DMBs) on behalf of their customers. The CBN aims to provide more avenues for short-term investment and deepen the money market.

Furthermore, the apex bank has removed previous restrictions on accessing its Discount Window. These restrictions were previously linked to participation in the Nigerian Foreign Exchange Market (NFEM) and primary auctions of government securities. The CBN also reinstated Tenored Repo Operations, allowing for repo transactions with tenors ranging from four to 90 days, which is expected to aid liquidity management and monetary policy implementation.

The CBN retains control over the scale and timing of OMO issuances, stating that these will be determined by prevailing liquidity conditions and monetary policy objectives. The overall move is anticipated to enhance money market functioning and provide greater flexibility for domestic investors.