The Central Bank of Nigeria has revised its policy framework governing the Discount Window and Open Market Operations, easing certain foreign exchange restrictions while maintaining a key constraint on same-day liquidity access.
The changes were announced in a circular issued Wednesday by the apex bank’s Acting Director of the Financial Markets Department, Okey Umeano. According to the regulator, the review reflects an assessment of evolving conditions across the foreign exchange, money, and fixed-income markets.
Under the updated framework, the existing prohibition on institutions participating in Open Market Operations auctions on the same day they access the Discount Window will remain in place. This restriction is designed to prevent arbitrage between the standing facility and primary liquidity management tools.
However, the central bank has removed foreign exchange transaction restrictions that previously limited access to the Discount Window for institutions participating in the Nigerian Foreign Exchange Market or in primary auctions of government securities. The move is expected to improve liquidity flow and reduce segmentation between the FX and money market segments.
Additionally, the suspension on tenored repurchase transactions has been lifted, reintroducing a medium-term liquidity management instrument that had been paused. The reactivation of tenored repos provides banks with greater flexibility in managing funding profiles and gives the central bank an additional tool for monetary policy transmission.
The Central Bank stated that the review covers the framework governing access to the Standing Lending Facility, tenored repo operations, and participation in Open Market Operations. All changes take effect immediately.
Market participants have been awaiting adjustments to the Discount Window framework as the CBN continues to refine its monetary policy toolkit amid ongoing efforts to stabilize the naira and deepen domestic financial markets. The removal of FX-linked restrictions signals a willingness to allow greater interplay between currency and liquidity operations, while the retention of the same-day OMO barrier underscores the bank’s focus on maintaining operational discipline.
Analysts say the reinstatement of tenored repos could support the development of a more robust yield curve, particularly if uptake is sustained. The central bank has not indicated whether further adjustments are planned, though it emphasized that the review was driven by current market practices and developments.
