By Munachimso Obienyi
The Central Bank of Nigeria (CBN) has placed restrictions on market participants from accessing the CBN’s discount window on auction days.
This is according to a circular titled “ACCESS TO THE DISCOUNT WINDOW” signed by Angela Sere-Ejembi Director of the Financial Markets Department of the CBN at the weekend.
The apex bank had previously instructed Deposit Money Banks/Discount House that obtaining funds from any CBN lending window was 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).
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:
“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 CBN said.
The bank further 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 per cent) 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.
