As the Central Bank of Nigeria (CBN) stepped up its efforts to combat inflation and currency volatility, the Open Market Operations (OMO) sales increased eighteen times a year, signaling investors that conventional monetary policy would be adopted.
According to data from the CBN, the apex bank sold N11.8 trillion in OMO instruments to banks and investors in 2024, a 1,773.7 percent increase compared to the N627.2 billion auctioned in 2023.
The CBN spent N977.7 billion in 2024 to reimburse OMO, 171.3 percent more than the N323.5 billion it spent in 2023.
Central banks utilize OMO sales to manage the financial system’s liquidity or money supply. Central banks sell securities (such as treasury bills) to reduce surplus money in circulation to banks and other investors. This aids in stabilizing the economy and reducing inflation.
The CBN’s attempts to restrict excess liquidity, curb inflation, and stabilize the exchange rate are reflected in the steep increase of 171.3 percent in repayments and 1,773.7 percent in OMO sales, according to Ayodeji Ebo, Optimus by Afrinvest’s managing director and CBO.
“More OMO issuances increase borrowing costs by influencing interest rates and drawing in international investors. Although its efficacy is dependent on external circumstances and broader fiscal policies, this indicates a tightening of monetary policy to stabilize the economy,” he said.
According to Tilewa Adebajo, CEO of The CFG Advisory, OMO is a highly dependable indication and operational method the CBN uses to regulate liquidity in the financial markets.
Adebajo stated, “The repurchase trend may indicate CBN’s readiness to add liquidity to the financial markets.”
Nigeria’s headline inflation rate dropped significantly to 24.5 percent year over year in January 2025 from the pre-rebasing reading of 34.8 percent year over year in December 2024, according to the National Bureau of Statistics (NBS), which just rebased the CPI data.
The CBN, which oversees the banking and finance sector, raised the monetary policy rate (MPR) under Governor Olayemi Cardoso to control rising inflation.Â
The CBN raised its benchmark interest rate from 18.5 percent in February 2024 to 27.5 percent in November 2025. Additionally, according to data monitored by THE NEWS CHRONICLES, the official and parallel-market exchange rates for the naira converged for the first time in almost two years on February 20, 2025, when the naira was quoted at N1,510 at the parallel market on February 20, 2025, which was equal to the official closing rate of N1,510/$ on February 19, 2025. The last time both rates were equal was in June 2023.
According to analysts, too much liquidity causes inflation, which reduces the value of the naira. The CBN removes excess naira by selling OMO bills, which lowers inflationary pressure and contributes to the stability of the naira.
According to the data, the CBN has refunded N744.8 billion and sold OMO for N1.9 trillion since the beginning of the year.
Increasing money supply
The money supply (M3), as determined by the broad monetary aggregate M3, reached a new high of N110.98 trillion in the first month of 2025, up N2.02 trillion or 1.85% from N108.96 trillion in November of the previous year, notwithstanding the increased mop-up through OMO sales.
Additionally, the data indicates that in January 2025, the amount of cash in circulation reached an all-time high of N5.23 trillion. The amount of money in circulation rose 7.4%, or N360 billion, month over month from N4.87 trillion in November 2024.
The Monetary Policy Committee (MPC) recognized the Bank’s numerous measures during its first meeting of the year. These policies were designed to improve the transmission mechanism of monetary policy, ease exchange rate pressures, deepen financial inclusion, and anchor inflation expectations.
