The Central Bank of Nigeria (CBN) has announced the rollout of three new instruments targeted at deepening Nigeria’s non-interest financial market and improving liquidity management for Islamic finance institutions.
This move, disclosed in a circular dated May 23, 2025, is part of the apex bank’s broader strategy to strengthen the adoption and operational efficiency of non-interest banking instruments across the country’s financial system.
The circular was signed by Okey Umeano, Acting Director of the Financial Markets Department, and obtained by Nairametrics from the CBN website on Tuesday.
According to the CBN, the new instruments include the Nigerian Non-Interest Financial Institutions’ Master Repurchase Agreement (NNMRA), the CBN Non-Interest Asset-Backed Securities (CNI-ABS), and the CBN Non-Interest Note (CNIN).
These tools are expected to standardize market practices, deepen participation, and align Nigeria’s Islamic finance offerings with global best practices.
Standardizing non-interest repo transactions through NNMRA
- At the heart of the CBN’s liquidity support framework is the newly introduced Non-Interest Financial Institutions’ Master Repurchase Agreement (NNMRA).
- According to the circular, the NNMRA is a contractual framework designed to standardize and regulate repurchase (repo) transactions in Nigeria’s non-interest financial markets. It provides a globally acceptable structure for Islamic financial institutions engaging in liquidity management without violating Shariah principles.
- By introducing this master agreement, the CBN aims to establish clear responsibilities for all parties involved in non-interest repo transactions, including banks operating Islamic finance windows and the apex bank itself.
- This development is particularly significant because non-interest banks in Nigeria have historically faced limited options for managing short-term liquidity in compliance with Islamic principles. The NNMRA is therefore expected to support more efficient interbank funding and help integrate non-interest financial institutions more effectively into the country’s broader monetary operations.
CBN commences auction of Islamic liquidity instruments
- In addition to the master repo framework, the CBN announced the commencement of auctions for two new Islamic liquidity instruments, the CBN Non-Interest Asset-Backed Securities (CNI-ABS) and the CBN Non-Interest Note (CNIN).
- The CNI-ABS is a tradable instrument backed by tangible underlying assets and structured in accordance with non-interest finance principles. It is designed to help Islamic banks manage excess liquidity and comply with reserve requirements without relying on conventional interest-based tools.
- Meanwhile, the CBN Non-Interest Note (CNIN) is an interest-free loan instrument between the central bank and eligible participants. It complements the CNI-ABS by offering an additional avenue for liquidity absorption through periodic auctions.
- These two instruments are expected to form the cornerstone of the CBN’s Islamic liquidity management strategy, providing non-interest banks with a reliable and recurring mechanism for liquidity absorption and injection, previously a major challenge for operators in the space.
Compliance and regulatory requirements
All authorized participants including full-fledged non-interest banks and conventional banks with Islamic banking windows, have been directed to integrate the new instruments into their operations.
The CBN emphasized that these institutions must ensure full compliance with existing guidelines, circulars, and relevant regulatory frameworks. Notably, participants will not be permitted to access the apex bank’s discount window on CNI-ABS and CNIN auction days, reinforcing the separation of Islamic and conventional liquidity operations.
The circular also urged stakeholders to consult the Revised Guidelines for the Operation of Non-Interest Financial Institutions’ Instruments (2022) for more detailed operational procedures.
