CBN eases bank access to standing lending facility, FX and government securities markets

The Central Bank of Nigeria has removed restrictions that stopped banks from accessing its Standing Lending Facility after dealing in foreign exchange or buying government securities at primary auctions. Eligible lenders, including Access Bank, UBA and Zenith Bank, can now tap the apex bank's short-term liquidity without losing access to those markets.

The new framework, contained in a circular signed by Okey Umeano, acting director of the CBN's Financial Markets Department, gives banks greater flexibility to operate across the foreign exchange, money and fixed-income markets while managing their liquidity.

What has changed

Previously, banks that participated in transactions in the Nigerian Foreign Exchange Market (NFEM) or took part in primary auctions of government securities were locked out of the Discount Window. The CBN has now lifted both restrictions.

The Discount Window provides short-term funding to financial institutions facing temporary liquidity pressures. With the old limits removed, eligible banks can participate in FX transactions and buy government securities at primary auctions without automatically losing access to CBN liquidity.

OMO restriction remains

Not all restrictions have been dropped. The CBN kept its rule on Open Market Operations (OMO). Any institution accessing the Discount Window cannot participate in OMO auctions on the same day.

Umeano said the review followed the CBN's assessment of developments and market practices across Nigeria's foreign exchange, money and fixed-income markets. He added that the CBN had reviewed the framework covering access to the Standing Lending Facility, Tenored Repo Operations and participation in Open Market Operations.

What it means for the banking sector

The changes aim to improve money market functioning and strengthen the transmission of monetary policy. Banks no longer have to choose between emergency central bank funding and active trading in key financial markets.

The CBN also recently published updated lending rates for commercial and merchant banks as part of its transparency and consumer protection framework. That data, released on July 3, shows prime lending rates for customers with strong credit standings and maximum lending rates for borrowers with higher perceived risk. Households, small businesses and corporate borrowers can now compare the cost of credit before approaching any lender.