The Central Bank of Nigeria has relaxed borrowing rules for banks involved in foreign exchange trading and government securities.
The new rules will give banks more flexibility when managing their funds.
The move is also expected to improve liquidity in the banking sector.
The apex bank announced the changes in a circular issued on Wednesday.
The circular is titled “Review of Discount Window Restrictions and Open Market Operations Participation Framework.”
It was signed by the Acting Director of the Financial Markets Department, Okey Umeano.
Under the new rules, banks trading in the foreign exchange market can still access the CBN’s Discount Window.
The CBN has also removed restrictions linked to banks taking part in primary auctions of government securities.
This means eligible banks can participate in these markets. They can also access short-term funding from the CBN when needed.
The CBN’s Discount Window provides short-term funds to eligible banks.
The facility helps banks manage temporary cash shortages.
One of the facilities under the Discount Window is the Standing Lending Facility.
The new rules give banks more room to manage their liquidity.
However, some restrictions remain in place.
Banks that use the Discount Window cannot take part in OMO auctions on the same day.
The CBN retained this rule as part of its liquidity management policy.
OMO refers to Open Market Operations.
The CBN uses OMO to manage the amount of money in the banking system.
The apex bank has also lifted the suspension on Tenored Repo Operations.
Banks can now access repo operations with maturities ranging from four to 90 days.
This gives banks another way to manage their short-term funding needs.
It also gives the CBN more flexibility in managing liquidity.
The revised framework also opens the OMO market to more investors.
Eligible individuals, companies and non-bank financial institutions can now participate.
They can take part in both primary and secondary OMO markets through deposit money banks.
Commercial banks will continue to submit bids and settle transactions for their customers.
The CBN said the new rules took immediate effect.
The changes are part of efforts to improve liquidity management.
They are also aimed at strengthening Nigeria’s money market and supporting effective monetary policy.
