-
CBN removes restrictions limiting banks’ access to its Standing Lending Facility because of their participation in FX and government securities markets.
-
Apex Bank restores collateralised funding for tenors of four to 90 days and expands OMO participation to more investors.
-
New rules are aimed at improving money-market liquidity while preventing banks from exploiting the facilities for arbitrage.
August 14, (THEWILL) — The Central Bank of Nigeria (CBN) has eased restrictions on access to its liquidity facilities for banks active in the foreign exchange and government securities markets, while restoring longer-term funding operations of up to 90 days.
The changes, contained in a circular issued in August, are part of the apex bank’s efforts to improve liquidity management and strengthen the transmission of monetary policy through the financial system.
Under the revised framework, banks participating actively in the Nigerian Foreign Exchange Market and primary Treasury Bill auctions will no longer face restrictions on accessing the CBN’s Standing Lending Facility.
The Standing Lending Facility allows eligible banks to obtain short-term liquidity from the central bank against qualifying collateral.
CBN restores longer-term bank funding
The apex bank also lifted the suspension on tenored repurchase operations, allowing collateralised funding for periods ranging from four to 90 days.
The move gives banks access to funding beyond the shortest-term liquidity window and could help ease pressure in the interbank market, particularly when institutions face temporary funding mismatches.
Under a repurchase agreement, a financial institution obtains cash against eligible securities while agreeing to buy the securities back at a later date.
The CBN’s decision therefore provides banks with another channel for managing liquidity while maintaining the use of securities as collateral.
However, the regulator retained a key restriction. Banks cannot access the Discount Window and participate in Open Market Operations auctions on the same day.
The restriction is designed to prevent institutions from using the two facilities simultaneously to exploit differences in the cost of central bank liquidity and market yields.
READ ALSO: CBN Raises Treasury Bill Rate To 17.59% Despite ₦4.4trn Investment Demand
CBN: Nigeria’s FX Inflows Rise To $109.9bn As Autonomous Sources Fuel Growth
CBN Says Naira FX Gap Narrows Below 2 Percent as Reforms Gain Traction
OMO access widened
The broader participation gives the apex bank access to a wider pool of liquidity outside the banking system, and could increase the effectiveness of OMO transactions as a tool for managing excess liquidity.
For investors, OMO instruments provide an avenue to invest in short-term government securities, while for the CBN, the transactions help influence liquidity conditions and short-term interest rates.
The latest changes follow Nigeria’s broader shift towards a more market-based monetary-policy framework under Governor Olayemi Cardoso.
The CBN has in recent years introduced several reforms targeting the foreign exchange market, banking-sector liquidity, reserve requirements, government securities and money-market operations.
The latest measures are focused less on emergency intervention and more on improving the functioning of the financial system.
By easing access to its lending facility while restoring longer-term collateralised funding, the CBN is giving banks greater flexibility to manage liquidity. At the same time, restrictions on simultaneous access to different facilities are intended to limit arbitrage and protect the integrity of monetary-policy operations.
The changes could also improve liquidity and price discovery across Nigeria’s money and capital markets as financial institutions adjust to the revised operating framework.
Ogochukwu Onwaeze is a writer specializing in business and economic journalism. At THEWILL News Media, she translates market trends, financial developments, and policy shifts into clear and engaging stories.
