The Central Bank of Nigeria (CBN) has unveiled three new non-interest financial instruments aimed at advancing the development of non-interest financial markets in the country. These instruments are: the Nigerian Non-Interest Financial Institutions’ Master Repurchase Agreement (NNMRA), the Central Bank of Nigeria Non-Interest Asset-Backed Securities (CNI-ABS), and the Central Bank of Nigeria Non-Interest Note (CNIN). Each of these tools is designed to enhance liquidity management in the financial system while adhering to the principles of non-interest or Islamic finance.
According to a circular signed by Okey Umeano, Acting Director of the Financial Markets Department, the CBN has instructed all eligible and authorized market participants to begin incorporating these instruments into their financial operations. Participants are also mandated to comply fully with all relevant guidelines, circulars, and regulatory frameworks. Importantly, the CBN has emphasized that access to the Bank’s discount window will be restricted on days when CNI-ABS and CNIN auctions are conducted.
The NNMRA is a standardized contractual framework intended to govern repurchase (repo) agreements in the non-interest banking sector. This framework sets out internationally accepted standards and clearly outlines the responsibilities of all parties involved, including the CBN. It is expected to bring greater structure and clarity to repo transactions conducted by non-interest financial institutions.
The CNI-ABS is a liquidity management tool backed by tangible assets and structured in line with non-interest finance principles. It offers a Sharia-compliant alternative to conventional financial instruments, thus enabling non-interest banks to manage their liquidity more effectively.
Similarly, the CNIN represents a non-interest-based financial note that functions as an interest-free loan between the CBN and qualified participants. It is intended to complement existing non-interest instruments by offering another mechanism for managing liquidity through periodic auctions.
In conclusion, the CBN has reiterated the importance of integrating these new instruments into the operations of all eligible institutions and ensuring strict adherence to existing regulations. The Bank also affirmed its commitment to monitoring market conditions and issuing additional guidance as needed.