Nigeria’s Central Bank Governor Rules Out Foreign Investors’ Exclusion from Open Market Auctions

Foreign portfolio investors (FPIs) will not be barred from participating in the Open Market Operations (OMO) auctions, Central Bank of Nigeria (CBN) Governor, Mr. Godwin Emefiele, has said.

Emefiele, in a telephone interview with THISDAY on Wednesday, highlighted the importance of portfolio inflows to the economy, saying that forex liquidity plays an important role in supporting economic growth.

He spoke against the backdrop of a report by Bloomberg on Tuesday, which quoted CBN’s Director of Monetary Policy, Mr. Hassan Mahmud, as saying in an interview aired during an online conference in Abuja that the bank was preparing to end an era of debt sales that handed foreign investors one of the best returns in Africa.

Bloomberg had quoted Mahmud as saying that offerings to non-residents of OMO bills are to be phased out, “once current obligations have been redeemed.”

But Emefiele said there was no truth in the Bloomberg report just as he ruled out excluding FPIs from the OMO auctions.

According to him, the CBN considers FPIs as one of its important stakeholders and partners in the running of the forex market and the financial market.

“So, there is no contemplation and there would never be any contemplation of the exclusion of FPIs in the Nigerian financial market and the forex market,” he added.

In October 2019, the central bank had restricted OMO sales to banks and offshore investors, barring the participation of domestic institutional investors and non-banking firms.

He explained to THISDAY: “What the CBN did in 2019 was to ensure the exclusion of PFAs and corporates and individuals that are in the OMO market because the CBN felt that the cost and size of OMO were unbearably high. This has been achieved considerably. We see the FPIs as part of the sources through which foreign flows come into Nigeria.

“So, for anybody to say the CBN is trying to reduce the size of OMO and is planning to exclude FPIs is totally inaccurate. This is a financial market matter and the only person who can give responses on this issue would be the Financial Market Department of the CBN who are like the treasurers.

“Yes, the truth is that the CBN is a little bit concerned about the cost of OMO and that the reason the CBN took the decision it took in 2019, which substantially helped in bringing down the size of OMO bills as well as the cost of OMO. So, there is no intention to exclude FPIs from the market.”

He had at the last Monetary Policy Committee (MPC) meeting explained that the OMO and various other instruments were part of the CBN’s monetary policy instruments to control money supply.

“We have our numbers that tell us the optimal level of liquidity that is needed at every point in time for the economy to be stable and for us to be able to do our work.

“We would insist on that optimal level of liquidity. If we find any amount above that liquidity, we would suck it up because that is our job and we do not have any apology for doing our work,” he had said.

Nigeria’s Gross Domestic Product (GDP) recorded a positive growth rate of 0.11 per cent (year-on-year) in real terms in the fourth quarter of 2020 (Q4 2020), which successfully lifted the economy out of recession.

The positive growth recorded in Q4 was a reflection of the gradual return of economic activities following the easing of restriction of movements and limited local and international commercial activities in the preceding quarters, the National Bureau of Statistics had reported.

Obinna Chima

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