CBN lifts FX, bond restrictions on banks’ discount window access

The Central Bank of Nigeria (CBN) has removed restrictions that previously barred commercial banks from accessing its Standing Lending Facility (SLF), commonly known as the discount window, following their participation in foreign exchange trading and primary government debt auctions.

The policy shift, announced in a circular issued on Wednesday, is aimed at improving money market liquidity and giving financial institutions greater flexibility in managing short-term cash flows.

Under the revised framework, lenders can now trade in the Nigerian Foreign Exchange Market (NFEM) and subscribe to primary auctions of government securities without forfeiting access to the central bank’s overnight emergency funding window.

The decision follows a comprehensive review of money market operations, fixed-income markets, and liquidity management tools by monetary authorities.

Signed by Okey Umeano, Acting Director of the Financial Markets Department, the CBN circular confirms that restrictions linked to foreign exchange and treasury bill auctions have been abolished with immediate effect.

“The CBN has reviewed existing market practices and developments in the foreign exchange, money, and fixed-income markets,” Umeano stated.

“Restrictions on access to the Discount Window arising from participation in the Nigerian Foreign Exchange Market (NFEM) are hereby removed. The Bank has also removed restrictions arising from participation in primary auctions of government securities.”

The discount window acts as a crucial lender-of-last-resort mechanism, allowing eligible financial institutions to borrow short-term funds to settle daily clearing balances or meet temporary liquidity deficits.

Unfreezing Repo Operations and OMO Rules

Alongside easing access to the Standing Lending Facility, the central bank announced the restoration of Tenored Repo Operations across tenors ranging from 4 to 90 days, providing the apex bank with an expanded toolkit to manage banking sector liquidity.

“The suspension of Tenored Repo Operations is hereby lifted,” Umeano confirmed. “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.”

The central bank also broadened access to Open Market Operations (OMO), allowing individuals, corporates, and non-bank financial institutions to participate in both primary and secondary OMO auctions through Deposit Money Banks.

However, monetary authorities retained one key restriction: institutions accessing the discount window are still prohibited from participating in OMO auctions on the same day.