Stockbrokers have expressed fears about the likely reversal in the policy of the Central Bank of Nigeria on permissible investors in the Open Market Operations.
The CBN recently announced the exclusion of non-bank locals (individuals and corporates) from investing in OMO at both the primary and secondary markets, implying that only deposit money banks and foreign portfolio investors could participate.
This policy had crashed interest rates on Treasury bills and trimmed yields on bond, which prompted investors and fund managers to shift focus from the money market to the stock market, creating an increased demand for shares.
Worried by inconsistency usually associated with government policies in the country, Onyinyechukwu Ezeaguthe chairman, Association of Securities Dealing Houses of Nigeria, urged the federal government to sustain the current policy on OMO for enhanced attractive investment in the capital market.
He explained that the new policy on OMO had been very beneficial to the stock market, noting that the fall in interest rate created opportunities for higher return on equity.
According to him, investors are taking advantage of the inverse relationship between the money market and capital market.
Ezeagu, however, expressed concern about the sustainability of OMO policy going by uncertainties that usually characterises government policies in Nigeria.
He argued that the government might decide to reverse the OMO policy if banks mounted pressure that it was hurting their profit margin or if the CBN perceived a need to top up the nation’s external reserve.
He said, “It is too early to celebrate that the current rally in the stock market because of sustainability. Our concern is always policy uncertainty in Nigeria as 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.”
Analysts had also expressed fears that a devaluation of the naira was still in the offing in view of the current rising inflation rate in Nigeria.