omo bills
OMO bills are short term securities the Central Bank sells to mop up excess money in the banking system, and they have paid attractive yields.
In plain English
When there is too much money sloshing around the banking system, prices rise and the naira weakens. The Central Bank's tool for removing some of it is called open market operations, and OMO bills are the instrument.
The CBN sells these short term securities to banks and, at various points, to other investors. Buyers hand over naira and receive a security paying a yield. The naira the CBN receives is effectively taken out of circulation, which is precisely the point.
For investors, OMO bills have at times offered attractive returns, and access has swung back and forth over the years as policy changed. There have been periods when individuals could buy them and periods when they could not, which is why anything you read about them from two years ago may simply not be true today.
They sit alongside treasury bills as a place to park naira, and they answer a different question. Treasury bills fund the government. OMO bills manage the money supply.
Check with your broker what is currently available to you, and compare the yield against treasury bills and inflation before deciding anything.
The CBN issues OMO bills at an attractive yield. Banks and investors buy them, handing over naira. That naira leaves circulation, which is intended to slow inflation, and the buyer earns a return for the trouble.
Questions people ask
Can individuals buy OMO bills?
Access has changed several times with policy. Ask a licensed broker what is currently available rather than relying on older information.
How do they differ from treasury bills?
Treasury bills raise money for the government. OMO bills are used by the CBN to manage the money supply. Both are short term naira instruments.
Are they safe?
They carry the backing of the Central Bank, which makes them very low risk in naira terms. Inflation, as always, is the risk the safety does not remove.
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