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Thursday, September 21, 2023

CBN Bans Use of Discount Window to Fund Purchase of Treasury Bills, FX

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The Central Bank of Nigeria (CBN) has banned banks and authorized dealers from using funds borrowed from its discount window to purchase Treasury Bills and Foreign Exchange (FX).

The CBN said it has observed the non-adherence to the provisions of previous circulars on the issue by Authorized Dealers regarding the CBN discount window which includes the Standing Lending Facility (SLF), the Automated Repo Conversion (AREPO), the Funding for Liquidity Facility (FfLF), and the Tenored Repurchase Transactions (REPO).

According to the CBN, all authorized dealers are to note:

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.

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.

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.

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