CBN restricts OMO auctions to banks, foreign investors


The Central Bank of Nigeria (CBN) has directed all banks to exclude individuals and local corporates from investing in Open Market Operations auctions with effect from October 23, 2019.

The Director, Financial Markets Department, CBN, Angela Sere-Ejembi, in a circular stated that the banker insisted that participation of the financial institutions at the auction should be on proprietary and non-proprietary basis, without the participation of the investors mentioned above.

It stated, “This is a follow up to the circular released last week warning banks that all demand at auctions must be effective and fully backed by appropriate funding after observing high levels of unfunded bids at the OMO auction.

“Whether this is a move aimed at protecting the Naira, checking the excesses of banks or managing its OMO issuance cost, the move would certainly engender some level of uncertainty, which markets do not like.”

Non-compliance to the directive, CBN stated that the “sanctions could include cancelling bids.”

Meanwhile, Bank of America Corp. attributed the recent slide in demand for Nigerian bonds to the slowdown in the global economy as well as weak sentiment toward emerging-market assets. The West African nation depends on inflows into debt securities that yield more than 14% to help support the Naira.

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