CBN Bars Individuals, Domestic Firms from OMO Auction

Central Bank of Nigeria (CBN) has completely prohibited individuals and local firms from investing in both its primary and secondary Open Market Operations (OMO) auctions.

The central bank’s directive was contained in a circular titled: “Re: Open Market Operations Auctions,” dated October 24, 2019, and signed by Dr. Angela Sere-Ejembi, director, Financial Markets Department.

With this new CBN’s directive, investing in OMO bills would now be for banks and foreign investors alone.

However, some financial market analysts have expressed concern about the fate of non-bank financial institutions, such as PFAs that hold significant amount of treasury bills and OMO instrument in their portfolio and are by law requested to invest in such instruments.

The latest directive followed an earlier circular that was also signed by Sere-Ejembi, dated October 23, 2019, which had directed that individuals and local corporates “be specifically excluded from investing in OMO auctions,” and stated that the participation at the auctions, “should be on proprietary and non-proprietary basis, without these classes of investors.”

A central bank source, who pleaded to remain anonymous, however, explained that the new directive was part of efforts to ensure that financial institutions, which in desperate bid to meet the 65 per cent minimum loan to deposit ratio (LDR), don’t disburse loans to customers and local firms, who subsequently invest same in treasury bills and other money market and capital market securities.