CBN removes FX, government securities restrictions on discount window access

The Central Bank of Nigeria (CBN) has removed restrictions on banks’ access to its Standing Lending Facility (SLF) arising from participation in the Nigerian Foreign Exchange Market (NFEM) and primary auctions of government securities.

The apex bank disclosed the changes in a circular signed by CBN’s Acting Director, Financial Markets Department, Okey Umeano, on Wednesday.

The review followed an assessment of developments and existing market practices in the foreign exchange, money, and fixed-income markets, as well as the frameworks governing access to the SLF, Tenored Repo Operations, and participation in Open Market Operations (OMO).

The apex bank said the existing restriction on institutions accessing the Discount Window from participating in OMO auctions on the same day would, however, remain in force.

“Restrictions on access to the Discount Window arising from participation in the Nigerian Foreign Exchange Market (NFEM) are hereby removed,” CBN said.

It also stated that restrictions linked to participation in primary auctions of government securities had been removed.

The regulator also announced the lifting of the suspension of Tenored Repo Operations, saying the move would provide greater flexibility for liquidity management.

“The suspension of Tenored Repo Operations is hereby lifted. Accordingly, the CBN may conduct repo operations across approved tenors ranging from 4 to 90 days to support effective liquidity management, improve money market functioning and enhance monetary policy implementation,” CBN stated.

OMO participation framework

CBN further revised its OMO participation framework to allow a broader range of investors to participate in both primary and secondary OMO markets through Deposit Money Banks (DMBs).

It said eligible investors would include individuals, corporates and non-bank financial institutions, while DMBs would continue to submit bids and settle transactions on behalf of their customers.

“OMO participation (primary and secondary markets) shall be open to all eligible investors through Deposit Money Banks (DMBs). Eligible investors include individuals, corporates and non-bank financial institutions.

“DMBs shall continue to submit bids and settle transactions on behalf of their customers,” CBN said.

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The apex bank added that the volume, tenor, and frequency of OMO issuances would continue to be determined by prevailing liquidity conditions and monetary policy objectives.

OMO auctions, CBN said, would also continue to use the existing single-bid auction format.

The new provisions take immediate effect, with CBN directing all banks, authorised dealers and other market participants to ensure strict compliance.

“All banks, authorised dealers and market participants are required to ensure strict compliance,” the apex bank said.