The Central Bank of Nigeria (CBN) has placed restrictions on market participants from accessing the CBN’s discount window on auction days.
This was disclosed in a circular seen by Nairametrics titled “ACCESS TO THE DISCOUNT WINDOW” signed by Angela Sere-Ejembi Director of the Financial Markets Department of the CBN.
CBN has previously instructed Deposit Money Banks/Discount House that obtain funds from any CBN lending window are not allowed to simultaneously place funds in the inter-bank market. Furthermore, all authorized dealers were directed to refrain from accessing the discount window of the CBN on the settlement date for government securities auctions.
The CBN discount window includes the Standing Lending Facility (SLF), the Automated Repo Conversion (AREPO), the Funding for Liquidity Facility (FfLF), and the Tenored Repurchase Transactions (REPO).
What the CBN is saying
The apex bank said it has observed the non-adherence to the provisions of the previous instructions on the discount window. Thus, all authorized dealers are invited to note the following:
The CBN said, “Open Market Operations: Participants with successful bids at the Open Market Operations (OMO) auctions are to refrain from accessing the discount window on the auction date. Failure to comply shall result in the reversal of allotment.”
The bank added that “Government Securities: Participants with successful bids at the government securities auctions (e.g., Nigerian Treasury Bills (NTBs), Federal Government of Nigeria (FGN) Bonds and Sukuk), are not permitted to access the CBN discount window on the settlement date. Requests for SLF, FfLF, and REPO on the settlement date will not be permitted. AREPO and conversion of Intraday Liquidity Facility (IDF) to FfLF on the settlement date, as well as running REPO shall attract a penal charge of five percent (5.00%) flat on the allotment value.”
Market players with successful foreign exchange bids and transactions are not allowed to use the discount window on the dates of the auction and the transaction settlement
The bank said “Foreign Exchange: Participants with successful foreign exchange bids and transactions are not to access the discount window on both auction and transaction settlement dates. Failure to comply shall result in the cancellation of the bids or transactions. This Circular takes immediate effect. All authorized dealers are hereby required to comply accordingly.”
