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The Central Bank of Nigeria’s decision to reopen Open Market Operations (OMO) securities to individuals and corporates has created a new investment option for domestic investors.

Under a circular issued on August 12, 2026, individuals, companies and non-bank financial institutions can now participate in primary and secondary OMO markets through Deposit Money Banks.

The change reverses a key restriction introduced in 2019 and comes at a time when investors are already showing strong appetite for high-yielding fixed-income securities.

But beyond giving investors another place to put their money, the policy raises some key questions: could OMO compete with equities for funds on the Nigerian Exchange (NGX)?

First, what exactly is OMO?

Open Market Operations are one of the tools the CBN uses to manage the amount of money circulating in the financial system.

When the CBN believes there is too much liquidity, it can sell OMO bills and collect Naira from investors, effectively taking money out of the system.

So, it is sort of a market-based instrument used for liquidity management and maintaining macroeconomic stability.

This makes OMO different from Nigerian Treasury Bills, even though both are short-term fixed-income securities.

• Treasury Bills are Federal Government debt, issued through the CBN on behalf of the government and form part of the Federal Government’s domestic borrowing programme.
• Their proceeds ultimately support government financing needs.

That distinction matters because the CBN can determine how much OMO paper to issue depending on how much liquidity it wants to remove from the financial system.

Where OMO and Treasury Bills meet: Yield

Despite their different purposes, OMO bills and Treasury Bills compete for the same thing from an investor’s perspective: capital seeking relatively low-risk, short-term returns. This makes yield a common factor.

• At the August 12, 2026, Treasury Bills auction, investors submitted about N4.4 trillion in bids for only N700 billion on offer.
• The 91-day bill cleared at 16.30%, the 182-day bill at 16.50%, while the benchmark 364-day bill closed at 17.59%, despite the overwhelming demand.

Just one day later, investors submitted another N4.93 trillion for only N600 billion of OMO securities.

• The 103-day OMO bill cleared at 20.39%, while the 138-day instrument cleared at 20.01%. The CBN eventually allotted about N2.60 trillion, significantly above the amount initially offered.

On comparable short-term tenors, this leaves OMO offering between 3.5 to 4 percentage-point premium over Treasury Bills.

That premium is important because investors who previously concentrated short-term funds in Treasury Bills, deposits and other money-market instruments now have access to another high-yielding option.

Will wider access push OMO yield lower?

Analysts expect broader participation to put some downward pressure on OMO yields, although the extent will depend largely on the CBN’s liquidity-management objectives.

Israel Adebomi, Head of Investment Banking at STL Capital & Advisory Limited, said stronger demand does not automatically translate into lower yields because the CBN can respond by increasing the volume of OMO bills supplied or accepted.

• “The immediate impact should be stronger demand for OMO, but not necessarily lower OMO yields,” he said.

He ranks the key determinants as the CBN’s monetary and liquidity stance, volume supplied, and then investor demand.

Similarly, Isaac Osaro, Head of Investment Research at First Securities Brokers Limited, expects broader participation to exert downward pressure as more liquidity competes for OMO securities.

This suggests yields will reflect a balance between stronger investor demand and the CBN’s willingness to absorb liquidity.

If issuance remains limited, yields could compress. But if CBN continues accepting large volumes to sterilise excess liquidity, rates could remain elevated.

What happens to the NGX?

The reopening of OMO could increase competition for investor funds, but analysts do not expect it to trigger a broad exit from Nigerian equities.

Isaac Osaro, Head of Investment Research at First Securities Brokers Limited, argues that this depends largely on where OMO yields eventually settle. As more investors enter the market, stronger demand could itself push yields lower, reducing the attraction relative to equities.

He also notes that equity investors are not driven by dividends alone.

• “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.

His view is that OMO is more likely to become another portfolio option than a direct substitute for equities.

However, it may raise the hurdle rate. Companies capable of delivering strong earnings growth; dividends and capital appreciation can still compete for capital, while weaker-performing or richly valued stocks may find it harder to justify the additional risk investors take by holding equities.

If an investor can earn around 20% from OMO with relatively low risk, buying a stock becomes worthwhile only if the expected return is sufficiently higher to compensate for the additional risk.

For example, a company growing profits strongly, paying good dividends and still having room for its share price to rise can remain attractive. But a stock with weak earnings growth, little or no dividend, or an already expensive valuation becomes harder to justify when a lower-risk alternative is offering close to 20%.

This is why stock selection becomes more important, and an investor should ask, why should I take equity risk for a possible 15%–20% return when OMO can offer something close to that with significantly less risk?

So rather than hurting every stock equally, higher OMO yields are more likely to separate stronger companies from weaker ones on the NGX.