Document Type

Occasional Paper

Publication Title

Open Market Operations of the Central Bank of Nigeria: Theory, Development and Growth


The aim of the paper is to assess the efficacy of the open market operations of the Central Bank of Nigeria (CBN), as an instrument of monetary management. Against the adopted framework of the instrument, it analyses the movements in open market transactions and changes in the portfolio of treasury bill holdings of the CBN and other financial institutions. The initial application of the instrument was quite successful, resulting in the sale of large volumes of the securities and consequent decline in the portfolio of CBN’s holdings of government securities. These trends were reversed in the latter part of the review period owing in large part to the changing economic policy environment. On the whole, the open market operations of the CBN failed to keep the base money [the operating variable] and money supply within the established targets, explained mainly by the large fiscal deficits of the Federal Government financed by CBN credit, as well as the inadequate depth of the financial markets. The implications of the review include the need to maintain a stable macroeconomic environment and for the CBN to have the discretionary power to apply the instrument as desirable.

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