The Central Bank of Nigeria has begun to unwind measures introduced in the wake of the global financial crisis.

The CBN in a circular last Friday issued a revised guideline to all Deposit Money Banks and discount houses on how to access the CBN lending windows and repurchase transactions. A repurchase agreement, also known as a repo, is the sale of securities together with an agreement for the seller to buy back the securities at a later date.

The circular stated that banks or discount houses that placed funds in the inter-bank market were not allowed to concurrently access the CBN window.

It said, “As part of the process of unwinding the extraordinary measures introduced in the wake of the global financial crisis and to ensure the effectiveness of monetary policy, any bank or discount house that obtains funds from any CBN lending window is not allowed to simultaneously place funds in the inter-bank market.

“Not up to five days after the release of the guideline, the apex bank on Wednesday said, “Further to the prohibition of authorised dealers from accessing the WDAS and standing lending facility on the same day, authorised dealers are henceforth not allowed to access the WDAS window throughout the term of a repurchase or SLF transaction with the CBN

“However, authorised dealers that have entered into repurchase or SLF transaction with the CBN prior to the issuance of this circular will not be affected as the transaction would be allowed to run its full course.”

The CBN had earlier released guidelines for the conduct of repurchase transactions under the apex bank’s standing facilities.

It said, “The CBN offers to enter repurchase transactions under its SLF and TRF. The objectives of these facilities are to provide naira liquidity to eligible institutions that are unable to access funds on the inter-bank market and to set an upper limit on rates. The rates on the facilities are set at margins above expected market rates so as to provide sufficient incentive for banks to look first to the inter-bank market before seeking recourse to the CBN for funds.”

Source: Punch/Ademola Alawiye