In New Policy Tweak, CBN Removes Discount Window Restrictions on FX, Government Securities Transactions

• Broadens OMO participation as individuals, corporates, non-bank financial institutions gain access to market through banks •Resumes tenored repo operations of up to 90 days to deepen liquidity management • Declares reforms designed to improve money market functioning, strengthen monetary policy transmission James Emejo in Abuja and Nume Ekeghe in Lagos Central Bank of Nigeria (CBN), yesterday, announced the removal of restrictions preventing financial institutions that accessed its Standing Lending Facility (SLF) from participating in Foreign Exchange (FX) and primary government securities transactions. The changes, which took immediate effect, sought to provide banks and other market participants greater flexibility in managing liquidity among others. The central bank conveyed the development in a circular to all Deposit Money Banks (DMBs), authorised dealers, and the general public, which was dated August 12, 2026, and issued by its acting Director, Financial Markets Department, Okey Umeano. The apex bank said the changes followed a review of developments in the FX, money and fixed-income markets. Under the revised framework, institutions that accessed CBN’s discount window will no longer lose access to the facility because of their participation in the Nigerian Foreign Exchange Market (NFEM) or primary auctions of government securities. The decision effectively dismantles two of the restrictions previously associated with access to the central bank’s liquidity support window. CBN, however, retained the restriction on participation in Open Market Operations (OMO) auctions by institutions that accessed the Discount Window on the same day. The new framework also provides for the return of tenored repurchase, or repo operations, which had been suspended. Repos allow the central bank to inject or absorb liquidity against eligible securities for a specified period, giving monetary authorities greater flexibility in calibrating liquidity conditions in the banking system. CBN said it could now conduct repo operations across approved tenors ranging from four to 90 days, with the measure expected to support more effective liquidity management, improve money market functioning and strengthen monetary policy implementation. The move represents another adjustment to the central bank’s operating framework as it seeks to improve the functioning of the financial markets and strengthen the transmission of monetary policy. Under the revised OMO framework, participation in both primary and secondary markets has also been broadened to all eligible investors through Deposit Money Banks (DMBs). The eligible investors include individuals, corporates, and non-bank financial institutions. CBN said DMBs would continue to submit bids and settle transactions on behalf of their customers, effectively widening the pool of investors able to participate in OMO transactions through the banking system. The apex bank, however, maintained its control over the scale and timing of OMO interventions, stating that the volume, tenor and frequency of issuances would continue to be determined by prevailing liquidity conditions and monetary policy objectives. It also retained the existing single-bid auction structure for OMO transactions. The review build on earlier reforms of CBN monetary policy and financial market operating framework, particularly its efforts to improve liquidity management and ensure that market-based instruments play a more effective role in monetary policy implementation. CBN had in October 2022 issued guidelines governing access to the Discount Window, while its OMO auction participation framework dated back to 2019. The revised rules now differentiate more clearly between market activities that should restrict access to central bank liquidity and those that should not. In particular, participation in the FX market and government securities auctions will no longer constitute grounds for restricting access to the Discount Window. The retention of the OMO restriction, however, indicates that the CBN continues to maintain safeguards against simultaneous access to its liquidity window and participation in its own same-day liquidity-management operations. The resumption of tenored repo operations is also significant for liquidity management, as the four-to-90-day tenor range gives the CBN an additional instrument for managing liquidity beyond very short-term operations. Rather than limiting OMO participation primarily to a narrower group of institutional participants, the revised framework expressly brings individuals, corporates and non-bank financial institutions within the eligible investor base. CBN said all banks, authorised dealers, and market participants were required to ensure strict compliance with the new directives.