CBN reopens OMO to individual investors, piles pressure on weak equities

The Central Bank of Nigeria has reopened its Open Market Operations (OMO) securities to retail and corporate investors, a move that could intensify competition for funds between fixed-income instruments and Nigerian equities. The policy, announced in a circular dated 12 August 2026, allows individuals, companies and non-bank financial institutions to participate in the primary and secondary OMO markets through deposit money banks.

The decision reverses a restriction introduced in 2019 and gives domestic investors direct access to one of the CBN's key liquidity-management tools. While it broadens investment opportunities, the potential impact on the Nigerian Exchange is drawing attention, especially because OMO securities are currently offering yields significantly above comparable treasury bills.

OMO yields beat T-bills by up to 400 basis points

At the treasury bills auction conducted on 12 August, investors submitted about N4.4tn in bids for N700bn on offer. The 91-day bill cleared at 16.30 per cent, the 182-day instrument at 16.50 per cent, while the 364-day bill closed at 17.59 per cent.

The following day, demand for OMO securities was even stronger. Investors submitted N4.93tn for N600bn initially offered by the CBN. The 103-day OMO bill cleared at 20.39 per cent, while the 138-day instrument recorded a yield of 20.01 per cent. The CBN eventually allotted about N2.60tn.

The yield differential means investors can currently earn roughly three to four percentage points more from comparable OMO instruments than from treasury bills.

Funds may shift away from equities

“For investors, the implication is that some funds previously allocated to deposits, treasury bills and other money-market instruments could be redirected towards OMO securities,” said an emerging markets analyst, Ike Ibeabuchi. “This has the capacity to create a higher return threshold for equities, particularly stocks with weak earnings growth, low dividend yields or valuations that do not adequately compensate investors for the additional risks associated with equities.”

Some analysts say the immediate impact should be stronger demand for OMO, but not necessarily lower OMO yields. The eventual effect on the equities market could therefore depend on how far OMO yields fall as participation expands.

Differentiation across NGX likely

Experts say companies with weak earnings, limited dividend prospects or stretched valuations could come under greater pressure as investors gain access to a relatively lower-risk instrument offering higher returns. The reopening of OMO could therefore deepen differentiation across the NGX rather than trigger a wholesale selloff.

An Abuja-based economist, Nonso Iheoma, noted that investors may increasingly “demand a clear risk premium before committing funds to equities, making corporate earnings, dividend performance and valuation more important in determining where capital flows.”

For the naira and Nigerian businesses, the policy reinforces the CBN's push to mop up excess liquidity and keep rates attractive. But listed companies that cannot justify their valuations with stronger earnings may find it harder to attract local capital as safer, higher-yielding alternatives become available to everyday investors.