The Open Market Operations (OMO) sales surged 18 times in one year as the Central Bank of Nigeria (CBN) intensified its fight against inflation and naira volatility, sending a signal to investors of a shift to orthodox monetary policy.
Data from the CBN revealed that the apex bank sold N11.8 trillion OMO instruments to banks and investors in 2024, rising by 1,773.7 percent, compared to N627.2 billion auctioned in 2023.
In terms of OMO repayment, the CBN spent N977.7 billion in 2024, marking a 171.3 percent increase from N323.5 billion in 2023.
OMO sales are a tool used by central banks to control liquidity (money supply) in the financial system. Central banks sell securities (such as treasury bills) to banks and other investors to reduce excess money in circulation. This helps to curb inflation and stabilise the economy.
Ayodeji Ebo, an investment professional and managing director/CBO at Optimus by Afrinvest, said the sharp 1,773.7 percent rise in OMO sales and 171.3 percent increase in repayments reflect the CBN’s efforts to control excess liquidity, curb inflation, and stabilise the exchange rate.
“Higher OMO issuances help attract foreign investors and influence interest rates, impacting borrowing costs. This signals a tightening monetary policy to stabilise the economy, though its effectiveness depends on broader fiscal policies and external factors,” he said.
Tilewa Adebajo, chief executive officer (CEO) of The CFG Advisory, said OMO is a very reliable indicator and operating mechanism by which the CBN’s controls liquidity in the financial markets.
“The trend for repurchases might signify CBN’s willingness to inject liquidity into the financial markets,” Adebajo said.
The National Bureau of Statistics (NBS) recently rebased the CPI reading, revealing a sharp reduction in Nigeria’s headline inflation rate to 24.5 percent year/year in January 2025 compared with the pre-rebasing reading of 34.8 percent y/y in December 2024.
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Under Olayemi Cardoso, governor of the CBN, the banking and finance sector regulator has increased the monetary policy rate (MPR) to rein in rising inflation. From 18.5 percent in February 2024, the CBN increased its benchmark interest rate to 27.5 percent in November 2025.
Similarly, the official and parallel-market exchange rates for the naira converged for the first time in nearly two years on February 20, 2025, according to data tracked by BusinessDay.
The naira was quoted at N1,510 at the parallel market on February 20, 2025 on a par with the official closing rate of N1,510/$ on February 19, 2025. The last time both rates were at par was in June 2023.
Analysts posit that excess liquidity leads to inflation, which weakens the naira’s purchasing power. By selling OMO bills, the CBN mops up excess naira, reducing inflationary pressure and helping to maintain the naira’s stability.
The data show that year-to-date, the CBN has auctioned OMO worth N1.9 trillion and repaid N744.8 billion since the beginning of the year.
Money supply rising
However, in spite the increased mop-up through OMO sales, money supply (M3), as measured by the broad monetary aggregate M3, hit a record high of N110.98 trillion in the first month of 2025, marking an increase of N2.02 trillion or 1.85 percent compared to N108.96 trillion in November last year.
The data also show that currency in circulation rose to an all-time high of N5.23 trillion in January 2025. On a month-on-month basis, money in circulation increased by 7.4 percent or N360 billion from N4.87 trillion recorded in November 2024.
During its first meeting of the year, the Monetary Policy Committee (MPC) acknowledged the various policies by the Bank aimed at anchoring inflation expectations, easing exchange rate pressures, deepening financial inclusion, and improving the transmission mechanism of monetary policy.
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