CBN allows banks to trade FX, buy bonds without losing emergency funding

The Central Bank of Nigeria (CBN) has removed restrictions that prevented commercial banks from accessing its overnight lending facility after participating in foreign exchange trading or government debt auctions.

The change, announced in a circular on Wednesday, is intended to improve liquidity in the money market and give banks more flexibility to manage short-term cash needs.

Under the new rules, banks can now trade in the Nigerian Foreign Exchange Market (NFEM) and buy government securities at primary auctions without losing access to the CBN’s Standing Lending Facility, commonly known as the discount window.

The facility allows eligible banks to obtain short-term funding from the central bank to cover temporary liquidity shortages and meet daily settlement obligations.

The CBN said the changes followed a review of developments in the foreign exchange, money and fixed-income markets.

“Restrictions on access to the Discount Window arising from participation in the Nigerian Foreign Exchange Market (NFEM) are hereby removed,” said Okey Umeano, acting director of the CBN’s Financial Markets Department.

“The Bank has also removed restrictions arising from participation in primary auctions of government securities.”

CBN restores longer-term repo operations

The central bank also lifted the suspension of Tenored Repo Operations, allowing it to conduct repurchase transactions with banks for periods ranging from four to 90 days.

The move gives the CBN another tool for managing liquidity in the banking system and influencing short-term interest rates.

“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,” Umeano said.

The CBN also expanded participation in Open Market Operations (OMO), allowing individuals, companies and non-bank financial institutions to participate in primary and secondary OMO auctions through deposit money banks.

One restriction remains: institutions that access the CBN’s discount window cannot participate in OMO auctions on the same day.