The Central Bank of Nigeria’s decision to reopen Open Market Operations securities to individuals and corporate investors has created a new high-yield investment option and intensified competition for capital within the domestic financial market.
Under a circular dated August 12, 2026, individuals, companies and non-bank financial institutions can now participate in the primary and secondary OMO markets through Deposit Money Banks.
The decision reverses a restriction introduced in 2019 and comes amid strong investor demand for short-term fixed-income securities.
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The circular, titled Review of Discount Window Restrictions and Open Market Operations Participation Framework, states that commercial banks will continue to submit bids and settle transactions for customers.
The CBN retained control over the volume, tenor and frequency of OMO issuances, which will be determined by prevailing liquidity conditions and monetary-policy objectives. The existing single-bid auction structure also remains in place.
Beyond giving Nigerians another investment channel, the policy raises an important question: will attractive OMO yields divert funds from equities listed on the Nigerian Exchange?
What are OMO securities?
Open Market Operations are instruments used by the CBN to regulate the volume of money circulating within the financial system.
When the apex bank believes there is excess liquidity, it sells OMO bills to investors and collects naira from the market. This effectively withdraws money from circulation and supports the implementation of monetary policy.
Although OMO bills and Nigerian Treasury Bills are both short-term fixed-income instruments, they serve different purposes.
Treasury Bills constitute Federal Government debt and are issued through the CBN as part of the government’s domestic borrowing programme. Their proceeds help to meet government financing requirements.
OMO securities, however, are primarily monetary-policy instruments. The CBN determines how much to issue based on the volume of liquidity it intends to withdraw from the financial system.
OMO yields outperform Treasury Bills
Despite their different functions, OMO bills and Treasury Bills compete for capital seeking relatively low-risk, short-term returns.
At the August 12 Treasury Bills auction, investors submitted approximately ₦4.4 trillion in bids for ₦700 billion worth of securities.
The 91-day instrument cleared at 16.30 per cent, the 182-day bill closed at 16.50 per cent, while the benchmark 364-day bill recorded a stop rate of 17.59 per cent.
Investor demand was similarly strong at the August 13 OMO auction.
Subscriptions reached ₦4.93 trillion against an initial offer of ₦600 billion across the two maturities. The 103-day OMO bill cleared at 20.39 per cent, while the 138-day instrument closed at 20.01 per cent.
The CBN eventually allotted approximately ₦2.60 trillion more than four times the amount initially offered, according to official government securities data.
On comparable short-term maturities, OMO securities consequently offered a premium of approximately 3.5 to four percentage points over Treasury Bills.
That difference could encourage investors who previously held short-term funds in Treasury Bills, deposits and money-market products to consider OMO securities.
Could wider participation reduce OMO yields?
Market analysts expect the entry of individuals, companies and non-bank financial institutions to strengthen demand and potentially place downward pressure on OMO yields.
However, the extent of any decline will depend on the CBN’s liquidity-management objectives and the volume of securities it issues.
Israel Adebomi, Head of Investment Banking at STL Capital & Advisory Limited, said stronger demand would not automatically result in lower yields because the CBN could respond by increasing the volume offered or accepted.
“The immediate impact should be stronger demand for OMO, but not necessarily lower OMO yields,” Adebomi said.
He identified the CBN’s monetary and liquidity position, the volume of securities supplied and investor demand as the major determinants of OMO rates.
Isaac Osaro, Head of Investment Research at First Securities Brokers Limited, also expects broader participation to exert downward pressure as more funds compete for the available instruments.
This means future yields will reflect the balance between growing investor demand and the CBN’s willingness to absorb excess liquidity.
If the volume of OMO securities remains limited, increased competition could compress rates. However, if the CBN continues to accept large subscriptions to withdraw excess money from the system, yields could remain elevated.
Will OMO compete with Nigerian equities?
The reopening of OMO securities to domestic investors is expected to increase competition for investible funds, but analysts do not anticipate an indiscriminate exit from the Nigerian equities market.
Osaro said the potential impact would depend substantially on where OMO yields settle after wider participation takes effect.
While a fixed-income return of between 15 and 20 per cent may appeal to risk-conscious investors, equities can still deliver higher returns through share-price appreciation and dividends.
“A 15%–18% fixed-income return may look attractive, but it does not necessarily compete with a stock that could deliver a 30%–50% total return over a year,” Osaro said.
OMO securities may, therefore, become an additional portfolio option rather than a complete substitute for equities.
However, high fixed-income yields could raise the minimum return investors expect before assuming the greater risks associated with stocks.
If investors can earn close to 20 per cent from relatively low-risk OMO securities, a company’s shares must offer sufficiently higher potential returns to justify exposure to price volatility and business risks.
Companies with strong earnings growth, sustainable dividends and potential share-price appreciation may continue to attract capital. Conversely, stocks with weak fundamentals, limited dividends or expensive valuations could struggle to compete.
The policy is consequently unlikely to affect every listed company equally. Instead, it could encourage more selective investment on the NGX, separating businesses with strong fundamentals from those unable to offer returns commensurate with their risks.
For domestic investors, the reopened OMO market expands the available investment choices. For listed companies, it establishes a higher benchmark that their potential returns must exceed to retain investor interest.
