By Peter Egwuatu
WORRIED by inconsistency usually associated with government policies in Nigeria, the Association of Securities Dealing Houses of Nigeria (ASHON) has urged the federal government to sustain the current policy on Open Market Operations (OMO) for enhanced attractive investment in the capital market.
The Central Bank of Nigeria, CBN, recently announced the exclusion of non-bank locals (individuals and corporate) from participation in OMO at both the primary and secondary markets, implying that only Deposit Money Banks (DMBs) and foreign portfolio investors can participate in this juicy 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 in an atmosphere of Santa Claus rally.
Commenting on the development, Chief Ezeagu explained 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 characterize government policies in Nigeria. He argued that the government 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 that the current rally because of 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.
“Banks should lend money to the real sector to enhance economic growth and development. Banks are currently awashed with liquidity and this should be channelled to the real sector.” Ezeagu said.