CBN Gives Warning on Access to Discount Window

The Central Bank of Nigeria (CBN) yesterday insisted that certain categories of its authorised dealers are not allowed to access the discount window on specified transactions.

The central bank stated this in a circular to all dealers on the access to the discount window, which was dated October 7, 2022, and signed by the apex bank’s Director, Financial Markets Department, Dr. Angela sere-Ejembi.

The bank specifically reminded participants with successful bids at the Open Market Operations (OMO) auctions to refrain from accessing the discount window on the auction date.

The CBN warned that henceforth, failure for non-compliance to the directive shall result in the reversal of the allotment.

Similarly, the bank emphasised that successful bids at the government securities auctions, including the Nigerian Treasury Bills (NTBs) FGN Bonds, and Sukuk, are not permitted to access the CBN discounted window on the settlement date.

The bank explained that the move was necessitated by the non-adherence to the provisions guiding access to the discount window in spite of two previous circulars on the subject in 2012 and 2016.

The CBN stressed that requests on Standing Lending Facility (SLF), Funding for Liquidity Facility (FfLF) and Tenored Repurchase Transactions (REPO) would not be permitted.

It added that the Automated Repo Conversion (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 per cent flat on the allotment value.

According to the central bank, the circular, which takes immediate effect, also stated that participants with successful foreign exchange bids and transactions are not to not to access the discount window on both auction and transaction settlement dates, warning that any contravention to the directive shall result in cancellation of the bids or transactions.

However, the 2016 circular directed all authorised dealers to refrain from accessing the discount window of the CBN on the settlement date for government securities auctions.

The bank further insisted that authorised dealers who come to any CBN’s windows are prohibited from the interbank foreign exchange market on the same day.

The apex bank stated that, “In view of the observed abuse of access to the Central Bank of Nigeria (CBN) Standing Lending Facility by authorised dealers, it has become imperative that some measures be taken to redress the trend and re-define the mode of operation by authorised dealers at the window.”