The Central Bank of Nigeria (CBN) has introduced three new financial instruments aimed at enhancing liquidity management and deepening the non-interest financial market in Nigeria. This initiative aligns with the apex bank’s broader objective to promote the growth and efficiency of Islamic banking within the country’s financial system.
Announced in a circular dated May 23, 2025, and signed by Okey Umeano, Acting Director of the Financial Markets Department, the rollout includes the Nigerian Non-Interest Financial Institutions’ Master Repurchase Agreement (NNMRA), CBN Non-Interest Asset-Backed Securities (CNI-ABS), and the CBN Non-Interest Note (CNIN).
Standardizing Non-Interest Repo Transactions with the NNMRA
At the core of the new framework is the NNMRA, a standardized contractual agreement designed to govern repurchase (repo) transactions in Nigeria’s Islamic finance sector. This agreement provides a Shariah-compliant structure for liquidity management activities between Islamic financial institutions and the central bank.
Historically, non-interest banks in Nigeria have struggled with limited options for managing short-term liquidity without breaching Islamic principles. The introduction of the NNMRA aims to streamline interbank funding processes, clarify the roles and responsibilities of participants, and better integrate non-interest financial institutions into Nigeria’s broader monetary framework.
New Islamic Liquidity Instruments: CNI-ABS and CNIN
The CBN has also commenced auctions for two complementary Islamic liquidity instruments:
- CBN Non-Interest Asset-Backed Securities (CNI-ABS): Tradable securities backed by tangible assets, structured to align with non-interest principles. These securities provide Islamic banks with an effective tool for managing excess liquidity and meeting reserve requirements without relying on conventional interest-based instruments.
- CBN Non-Interest Note (CNIN): An interest-free loan instrument issued by the CBN to eligible participants through periodic auctions. This instrument complements the CNI-ABS, offering additional flexibility in liquidity absorption and injection.
Together, these instruments are expected to form the backbone of the CBN’s Islamic liquidity management strategy, addressing longstanding challenges faced by operators in this sector.
Regulatory Compliance and Operational Guidelines
The CBN has directed all authorized participants including full-fledged Islamic banks and conventional banks with Islamic windows to incorporate these instruments into their liquidity management frameworks. Strict compliance with existing regulatory guidelines, including the Revised Guidelines for the Operation of Non-Interest Financial Institutions’ Instruments (2022), is mandatory.
Notably, institutions will be barred from accessing the central bank’s discount window on days when CNI-ABS and CNIN auctions are held, reinforcing a clear operational distinction between Islamic and conventional liquidity management activities.
