The Central Bank of Nigeria’s (CBN) decision to reopen Open Market Operations (OMO) securities to retail and corporate investors could intensify competition for funds between the fixed-income market and Nigerian equities.
The policy, announced in a circular dated August 12, 2026, allows individuals, companies and non-bank financial institutions to participate in the primary and secondary OMO markets through deposit money banks.
The move reverses a restriction introduced in 2019 and gives domestic investors direct access to one of the CBN’s key liquidity-management instruments.
While the policy expands investment options, its potential impact on the Nigerian Exchange (NGX) is attracting attention because OMO securities are currently offering yields significantly above comparable Treasury bills.
At the Treasury bills auction conducted on August 12, investors submitted about N4.4 trillion in bids for N700 billion on offer.
The 91-day Treasury bill cleared at 16.30%, while the 182-day and 364-day instruments closed at 16.50% and 17.59%, respectively.
Demand for OMO securities was even stronger the following day, with investors submitting N4.93 trillion for N600 billion initially offered by the CBN.
The 103-day OMO bill cleared at 20.39%, while the 138-day instrument recorded a yield of 20.01%. The CBN subsequently allotted about N2.60 trillion.
The yield differential means investors can currently earn roughly three to four percentage points more from comparable OMO instruments than from Treasury bills.
“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 emerging markets analyst Ike Ibeabuchi.
He said the development could 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.
The reopening is expected to initially strengthen demand for OMO securities, although analysts said the broader impact will depend partly on how yields respond as participation widens.
If increased participation drives OMO yields lower, the relative attractiveness of the securities could moderate. However, if yields remain elevated, equities could face greater competition for domestic investment capital.
Companies with weak earnings, limited dividend prospects or stretched valuations could be particularly exposed as investors gain access to a relatively lower-risk instrument offering higher returns.
The reopening of the OMO market could therefore deepen differentiation across the NGX rather than trigger a broad-based sell-off.
Investors may increasingly favour companies with strong earnings, consistent dividends and valuations that offer sufficient compensation for equity risk.
Abuja-based economist Nonso Iheoma said investors could 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.
The development could consequently increase the importance of fundamentals in the Nigerian equity market as investors weigh the potential returns from stocks against yields available in the fixed-income market.
