With OMO bills clearing above 20% while Treasury Bills remain below 18%, investors now have another high-yield option and weaker stocks may feel the pressure…..
The Central Bank of Nigeria (CBN) has reopened access to Open Market Operations (OMO) securities for individuals, companies and non-bank financial institutions, giving domestic investors another avenue to earn attractive returns on short-term funds.
Under a circular issued on August 12, 2026, eligible investors can now participate in both the primary and secondary OMO markets through Deposit Money Banks.
The move reverses a major restriction introduced in 2019 and comes at a time when demand for high-yielding fixed-income instruments remains strong.
But with OMO yields now significantly above comparable Treasury Bill rates, a bigger question is emerging in the market: could the reopening of OMO divert some investor funds away from Nigerian equities?
OMO securities are instruments the CBN uses to manage liquidity in the financial system.
When the central bank wants to reduce excess liquidity, it sells OMO bills to investors, effectively taking naira out of circulation. When conditions require otherwise, its liquidity operations can work in the opposite direction.
This makes OMO different from Treasury Bills, even though both are short-term fixed-income instruments.
Treasury Bills are Federal Government securities issued through the CBN as part of the government’s domestic borrowing programme, with the proceeds ultimately supporting government financing.
OMO bills, on the other hand, are primarily a monetary-policy tool used by the CBN to influence liquidity and financial conditions.
That difference is important because the CBN has greater flexibility to determine the amount of OMO securities it offers based on its liquidity-management objectives.
For investors, however, the distinction between the two instruments becomes less important when comparing returns.
At the August 12 Treasury Bills auction, investors submitted approximately N4.4 trillion in bids for just N700 billion worth of securities.
The 91-day bill cleared at 16.30 per cent, while the 182-day instrument closed at 16.50 per cent. The 364-day benchmark bill cleared at 17.59 per cent, despite the enormous demand.
The following day, demand for OMO securities was even more striking.
Investors submitted about N4.93 trillion for N600 billion initially offered by the CBN.
The 103-day OMO bill cleared at 20.39 per cent, while the 138-day instrument closed at 20.01 per cent.
The CBN ultimately allotted approximately N2.60 trillion, substantially above its initial offer.
That puts OMO yields roughly 3.5 to 4 percentage points above comparable Treasury Bill rates, creating a sizeable incentive for investors searching for short-term returns.
The reopening of the OMO market to a wider pool of investors is likely to increase demand, but that does not automatically mean yields will fall sharply.
What Does This Mean for the NGX?
The biggest concern for equity investors is whether OMO will become an alternative destination for money that would otherwise have flowed into stocks.
Analysts do not expect the reopening to trigger a wholesale flight from equities, but they believe it could change the way investors assess risk and returns.
Osaro said the impact on the Nigerian Exchange will depend significantly on where OMO yields settle.
If investors can consistently earn around 20 per cent from a relatively low-risk short-term instrument, equities will need to offer sufficiently attractive potential returns to justify their higher level of risk.
But that does not necessarily mean every stock will lose investor interest.
“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.
A company delivering strong earnings growth, paying consistent dividends and retaining significant potential for capital appreciation could remain attractive even when fixed-income yields are high.
On the other hand, companies with weak earnings prospects, little or no dividend income or stretched valuations could become much harder to justify.
The New Investment Hurdle
The reopening of OMO effectively gives investors another benchmark against which to measure the potential return from equities.
Consider an investor choosing between an OMO bill yielding around 20 per cent and a stock expected to produce a similar return.
The stock carries substantially greater uncertainty: its price can fall, dividends are not guaranteed and the investor may have to wait longer to realise the expected return.
For that investor, the equity would need to offer a sufficiently higher potential return to compensate for taking on the additional risk.
This could raise the required rate of return, or hurdle rate, for Nigerian stocks.
It could also make investors more selective.
Rather than abandoning the NGX altogether, investors may increasingly concentrate their money in companies with stronger fundamentals, sustainable earnings growth, attractive dividend prospects and reasonable valuations.
Strong Companies Could Still Attract Capital
High OMO yields, therefore, may not necessarily be bad news for the entire equities market.
Instead, they could create a sharper distinction between companies that genuinely offer compelling investment opportunities and those whose valuations are difficult to defend.
If an investor can earn close to 20 per cent with relatively low risk, a stock offering an uncertain 15–20 per cent potential return becomes considerably less attractive.
But a company capable of delivering strong earnings growth, substantial dividends and significant capital appreciation could still command investor attention.
This means the CBN’s decision could ultimately raise the standard investors apply when choosing stocks, rather than simply drain liquidity from the NGX.
For now, OMO has become a new competitor for domestic investment capital. Whether it becomes a serious threat to equities will depend largely on how long its elevated yields last—and how convincingly Nigerian companies can deliver returns that justify the additional risk of owning shares.
