Expect reasonably high OMO rates this year—Coronation

Coronation Asset Management has urged the investing public to expect reasonably high rates for the Open Market Operations (OMO) financial instrument sold by the Central Bank of Nigeria this year.

This forecast for one of CBN’S money market tools was contained in their Nigeria Weekly Update report titled “Where savings rates are going in 2024” and made available to BusinessDay.

In addition to the prediction for the OMO, it pointed out that Treasury bill rates would also go up, but at a modest rate this year.

It noted, “So, we may be set for reasonably high OMO rates this year (albeit below the rate of inflation) but moderate T-bill rates (starting with an auction in January that settled at 17.75%).”

The adjustment in the rates of OMO and T-bills is one of the effective ways the Yemi Cardoso-controlled CBN hopes to fight inflation in the country.

With inflation influenced primarily by the extremely high exchange rate value of the naira to other major currencies and the removal of petrol subsidy, the CBN is hopeful that raising money market rates, which is way below the inflation rate of 28 percent in 2023, will help curb this challenge.

It also added that since T-bill rates are likely to be adjusted upwards, investors should also expect a moderate upward adjustment on the rates of all FGN bond this year.

It said, “Since T-bill rates influence FGN bond rates, we may be set for moderate FGN bond rates this year, too.”

Meanwhile, the asset management firm also expressed optimism about the equities market in the first quarter of 2024. It commended the recent 83,000 basis points remarkable achievement in the All Share Index on the Nigerian Stock Exchange.

The firm anticipates that this positive trend will continue, particularly with the upcoming season of financial record presentations and dividend payment proposals by quoted companies.

It said, “We maintain that the positive sentiment can be linked to the traditional January surge as well as investors positioning themselves ahead of results and dividends for 2023. Though there may be a correction later on in the year (as in previous years, after January rallies), we expect the surge to continue this month.”