The Association of Securities Dealing Houses of Nigeria (ASHON) has called on the Central Bank of Nigeria (CBN) to sustain its policy on Open Market Operations (OMO) to enhance the attractiveness of the capital market.
The apex bank recently announced the exclusion of non-bank individuals and firms from participation in OMO at the primary and secondary markets, implying that only Deposit Money Banks (DMBs) and Foreign Portfolio Investors (FPIs) can participate in these financial instruments.
The new policy which crashed interest rate on Treasury Bill and trimmed yields on bond has prompted investors and fund managers to shift focus from the money market, staged a comeback to the capital with massive demand for shares.
Chairman, Association of Securities Dealing Houses of Nigeria (ASHON), Chief Patrick Ezeagu, said that the new policy on OMO had been very beneficial to the stock market.
He noted that the fall in interest rate created opportunities for higher return on equity (RoE) and the investors are taking advantage of the inverse relationship between the money market and capital market.
Ezeagu, however, expressed concerns on sustainability of OMO policy going by uncertainties that usually characterise government policies in Nigeria.
He argued that the CBN might decide to reverse OMO policy if banks mount pressure that it is hurting their profit margin or the CBN perceives a need to top up the nation’s external reserve.
According to him, it is too early to celebrate the current rally at the stock market because of risk of policy sustainability.
“Our concern is always policy uncertainty and consistency in Nigeria. This has been a major drag to the growth and development of the economy and by implication, the capital market.
The new policy on OMO is making investment in the market more attractive but the question is sustainability. We operate in an unpredictable environment where there can be policy somersault at the least expected time,” Ezeagu said.
He noted that the policies of the apex bank should drive banks to lend more to the real sector to enhance economic growth and development pointing out that banks are awashed with liquidity and this should be channeled to the real sector.
