The Central Bank of Nigeria (CBN) has intensified its monetary tightening measures to combat inflation and stabilize the naira, with Open Market Operations (OMO) sales surging by 1,773.7 percent in 2024.
According to data from the apex bank, OMO instruments worth N11.8 trillion were auctioned to banks and investors in 2024, compared to N627.2 billion sold in 2023. The significant rise reflects the CBN’s aggressive stance in mopping up excess liquidity from the financial system amid rising inflationary pressures.
What is Open Market Operations (OMO)?
Open Market Operations (OMO) are monetary policy tools used by central banks to regulate the financial system’s liquidity by buying or selling government securities, such as treasury bills, in the open market. When the CBN sells OMO bills, it reduces the amount of money in circulation, which helps curb inflation and stabilize the naira.
In 2024, the CBN also spent N977.7 billion to repay OMO bills, marking a 171.3 percent increase from N323.5 billion spent in 2023. This indicates the bank’s commitment to tightening monetary policy to control rising inflation.
CBN’s Monetary Policy Strategy
Investment specialist Ayodeji Ebo, Managing Director and Chief Business Officer at Optimus by Afrinvest, explained that the increase in OMO issuances reflects the CBN’s broader efforts to curb inflation and stabilize the exchange rate.
“More OMO issuances impact borrowing costs by influencing interest rates and attracting foreign investors. However, its efficacy depends on external factors and broader fiscal policies. This jump indicates a tightening of monetary policy to stabilize the economy,” Ebo said.
9am News Nigeria recalls that Nigeria’s headline inflation rate dropped significantly to 24.5 percent in January 2025 from 34.8 percent in December 2024, following the rebasing of the Consumer Price Index (CPI) by the National Bureau of Statistics (NBS).
Money Supply Still on the Rise
Despite the aggressive OMO mop-up, Nigeria’s money supply (M3) a broad measure of liquidity reached a record high of N110.98 trillion in January 2025. This represents a 1.85 percent increase or N2.02 trillion compared to N108.96 trillion recorded in November 2024.
Currency in circulation also peaked at N5.23 trillion in January 2025, indicating that excess liquidity remains a challenge for the apex bank.
Oversupply of money in the financial system is widely known to fuel inflation, which weakens the value of the naira. The CBN’s OMO sales are part of broader efforts to mop up excess cash, lower inflationary pressures, and stabilize the exchange rate.
The Monetary Policy Committee (MPC), during its first meeting of the year on February 19, 2025, acknowledged the CBN’s efforts in improving transparency, easing exchange rate pressures, deepening financial inclusion, and keeping inflation under control.
As Nigeria battles persistent inflation and currency instability, the CBN is expected to maintain its hawkish monetary policy stance in the coming months.
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