Central Bank of Nigeria(CBN) has directed deposit money banks to exclude individuals and domestic corporates from participating in its Open Market Operations (OMO).
In a circular addressed to the banks, Director, Financial Markets Department of the Central bank of Nigeria (CBN), Angela Sere-Ejembi, the directive only affects individuals and local corporates (inclusive of non-bank financial institutions) both at primary and secondary market activities.
OMO is a financial instrument used by the Central Bank to sell treasuries bills and other instruments.
Though no reason was given and move unclear, over the years, banks have used the Treasury Bill Market to keep their cash reserves high and make lending become harder.
Last month, the CBN raisedthe lending ratio to 65 per cent from 60 percent and also increase cash reserves of default banks.
The move, many believed would see banks compete to give out loans to the real sector of the economy hencethe CBN had come out to give some clarity.
Domestic corporates are Non-Banking Financial Institutions, hence only foreigners would be able to access OMO bills, which by design is a liquidity management tool and shouldn’t be offered to foreigners in the first place.
