By Collins Nweze
Deposit Money Banks (DMBs) have directed investors, especially individuals and corporates, to shun investments in Open Market Operation (OMO) auctions.
The directive, followed Central Bank of Nigeria’s (CBN’s) order to banks restricting OMO Bills purchase to non-bank financial institutions in both primary and secondary markets.
Individual and local corporate Investors are to channel their funds in other Federal Government securities namely Nigerian Treasury Bills (NTB), Federal Government of Nigeria Bonds (FGN Bonds), Federal Government of Nigeria Savings Bond (FGNSB), Sukuk and Green Bonds.
The Nigerian Treasury Bills (NTB) and Federal Government of Nigeria Bonds (FGN Bonds) can be purchased via the primary auctions and secondary markets.
In a note to customers, First City Monument Bank (FCMB), said: “We refer to our earlier messages on the Central Bank of Nigeria’s (CBN’s) circular to all banks on Open Market Operations auctions. In line with this directive, individuals and local corporates are specifically excluded from investing in Open Market Operations (OMO) auctions effective October 23, 2019. Please note that the restriction on OMO Bills purchase is applicable to non-bank financial institutions and applies to both primary and secondary market activities.”
The CBN has been educating the public on the use of OMO Bills and Nigerian Treasury Bills (NT Bills) in the economy.
In a statement, the CBN said the public often confuse OMO Bills with the NTBs hence the need to clarify the differences between the two instruments.
“Whereas the Central Bank of Nigeria (CBN) is the issuer of the OMO Bills, the CBN only issues the NTBs on behalf of the Debt Management Office (DMO) on behalf of the Federal Government of Nigeria. Also, while OMO Bills are strictly for liquidity management to achieve price stability, NTBs are for financing Federal Government budget requirements,” the statement said.
The OMO Bills, it added, are issued on need and at irregular intervals, depending on banking system liquidity position. Conversely, for NTBs, auctions are done mostly twice monthly strictly based on quarterly advanced or released calendar.
“The tenors for CBN OMO Bills are seven to 365 days, while those of NTBs are for 91, 182 and 364-day. The obligor for the CBN OMO Bills is the CBN, just as the Federal Government, is the obligor for NTBs”.
Also, on type of auction, OMO allows for single bids, where Money Market Dealers can submit only one bid. However, multiple bids are allowed under NTBs and Money Market Dealers can submit several bids.
OMO Bills and NTBs each have their unique identities, separate from other securities or instruments.
Treasury Bills auction holds fortnightly, while the Federal Government Bond auctions take place once monthly.
One can, however, buy NTB and FGN Bonds for customers from the secondary market, which trades every business day from 10am to 2pm.
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