The Central Bank of Nigeria (CBN) has relaxed rules governing banks’ access to its Standing Lending Facility (SLF), commonly known as the discount window, giving lenders greater flexibility in managing short-term liquidity. Under the new rules, banks will no longer be automatically barred from accessing the facility simply because they participated in the foreign exchange market or bought government securities through primary Open Market Operations (OMO) auctions.
The policy change, announced in a circular signed by Acting Director of the CBN’s Financial Markets Department, Okey Umeano, takes immediate effect. The apex bank said the review was driven by developments across the foreign exchange, money and fixed-income markets, with the goal of making liquidity management more flexible for banks while maintaining appropriate controls within the financial system.
However, the CBN has maintained one important restriction: a bank cannot access the discount window and participate in an OMO auction on the same day. At the same time, the apex bank has widened access to OMO auctions, allowing individuals, companies and non-bank financial institutions to participate through deposit money banks, which will handle the bidding and settlement process on their behalf.
The CBN has also brought back tenored repurchase, or repo, operations, providing another channel for managing liquidity in the banking system. Under the revised framework, banks can obtain repo funding for periods ranging from four to 90 days. The central bank will continue to determine the size, tenor and frequency of OMO sales, while retaining the single-bid auction format.
The latest move represents another step in the CBN’s ongoing efforts to modernise its monetary and financial market operations. Building on reforms introduced through its discount window guidelines and OMO framework, the new rules are expected to give banks more room to respond to changing liquidity conditions while keeping the central bank firmly in control of market operations. All banks and other affected market participants have been directed to comply with the revised framework immediately.
source: The Guardian
