CBN rolls out new liquidity management tools for non-interest banks
Omeiza Bilal
The Central Bank of Nigeria (CBN) has rolled out innovative liquidity management instruments specifically tailored for non-interest financial institutions.
These instruments, which are designed to enhance the structure and efficiency of Nigeria’s non-interest financial market, are known as the Nigerian Non-Interest Financial Institutions’ Master Repurchase Agreement (NNMRA) and the Central Bank of Nigeria Non-Interest Asset Backed Securities (CNi-ABS).
The initiative also includes the introduction of the CBN Non-Interest Note (CNIN), which helps to expand the suite of non-interest financial instruments available in the market.
The development was formally communicated through a circular dated May 23, 2025, signed by Okey Umeano, acting director of the Financial Markets Department of the CBN. The document, identified with the reference FMD/DIR/PUB/CIR/001/028, was addressed to all non-interest banks, conventional banks with non-interest banking windows, and authorised dealers. It outlined the deployment of the new instruments and underscored their role in strengthening liquidity management within the non-interest financial system.
The Nigerian Non-Interest Financial Institutions’ Master Repurchase Agreement is a contractual framework that aims to regulate and standardise the conduct of repurchase (repo) transactions within the non-interest banking space. According to the CBN, the agreement is intended to provide a comprehensive, internationally acceptable guideline that clearly defines the responsibilities of all counterparties involved, including the Central Bank itself. “This framework is essential to instill confidence in non-interest repo operations and to provide a robust platform that encourages broader participation,” the Bank stated.
The CBN has also commenced the auction of the CBN Non-Interest Asset Backed Securities, an instrument designed in line with the principles of non-interest finance. The CNi-ABS is backed by tangible assets and is constructed to provide non-interest banks with tools for managing liquidity without contravening the principles of their operations.
“The launch of the CNi-ABS aligns with our goal of promoting a diversified and resilient non-interest financial market,” the Bank noted in the circular, stressing the necessity of asset-backing to ensure transparency and compliance with ethical finance principles.
In addition, the Central Bank introduced the CBN Non-Interest Note, which represents an interest-free loan agreement between eligible financial participants and the CBN. The instrument offers another route for managing liquidity through scheduled auctions. It is meant to complement the existing suite of non-interest financial products already in place, while offering further flexibility to institutions that require short-term liquidity support. The CBN explained, “The CNIN is not only a compliance-friendly tool but also a strategic instrument to broaden access to non-interest liquidity solutions.”
Market participants have been advised to consult the “Revised Guidelines for the Operation of Non-Interest Financial Institutions’ Instruments by the Central Bank of Nigeria, 2022” for a detailed understanding of the operational mechanics and regulatory expectations surrounding these instruments.
In light of these introductions, all eligible and authorised participants are expected to take proactive steps in integrating these tools into their operational strategies. The Bank has also made it clear that on days when the auctions for CNi-ABS and CNIN are held, participants will be prohibited from accessing the Bank’s discount window. This measure, the CBN explained, is intended to preserve the integrity of the liquidity management process and prevent arbitrage between instruments.
The Central Bank reaffirmed its commitment to continuously monitor developments in the financial market and pledged to offer additional guidance where necessary. It stressed that the overarching goal is to foster a more vibrant, inclusive, and ethically sound financial system in Nigeria. As the non-interest financial sector continues to grow, these instruments are expected to serve as vital tools in enhancing participation and deepening the market’s overall effectiveness.
