The targeting of open market operations: the Bundesbank experience and lessons for Nigeria

Abstract

The study has lots of lessons for Nigeria, it suggests that the CBN should review its OMO programming, especially by identifying the major components of the other assets (net) of the CBN, which often time distort the monitoring of the growth in money supply. The operating target (bank reserves) of OMO should be linked to the interest rate movement and the size of OMO for final sale should be decided after the bids have been received. Also the CBN should introduce its own instruments to complement the existing OMO instruments; the CBN's facilities to banks should be fully backed by acceptable collaterals; the minimum reserve requirement accounts should be de-sterilized and a more comprehensive procedure for OMO accounting should be adopted.