In a bid to aid liquidity management and deepen the financial  system,  the  Central Bank  of Nigeria, CBN has introduces two new financial  instruments,  namely,  ‘Funding  for  Liquidity  Facility (FfLF)” and Intra-day Facility (IDF)” at its window, for  access  by  Non-Interest  Financial  Institutions (NlFls)  licensed by the Bank.

Under the Funding for Liquidity Facility (FfLF), the CBN will provide a liquidity facility on overnight basis only and to be terminated on next business day, while the Authorized Non-Interest Financial Institution (NIFI) is to provide eligible securities to the CBN as collateral for the facility.

The value of collateral to be a minimum of 110 per cent of the value of the facility. For  example, if a NIFI wishes to take a FfLF of N10 billion, it would be required  to provide  eligible security collateral worth N11 billion (that is N10 ” 1.1=N11 billion).

The CBN shall specify acceptable collateral(s) from time to time. These shall include, but not limited to the following securities. CBN Safe Custody Account (CSCA) Deposit, CBN Non-Interest Note (CNIN), CBN Asset-Backed  Security  (CBN-ABS), Sukuk (that  has received liquidity status from the CBN), Warehouse Receipt(s) as provided in the CBN Act 2007, and any other collateral designated by the CBN that does not contravene the CBN guidelines  for  NIFI’s operations.

·         The transaction shall be at a zero per cent interest rate.

·         The opening hours for FfLF shall be between 2.00pm — 3.30pm, and terminated on commencement of next business day.

·         At maturity, the transaction unwinds and the CBN receives back its funding and returns the collateral to the NIFI.

·         Failure to provide adequate funding in the account for the un-winding of transaction at maturity, the Bank (CBN) shall rediscount the pledged securities at par and recover the facility amount and return the net value to the NIFI.

·         The Market Support Committee (MSC) may approve an administrative charge in relation to the facility as it deems fit (in accordance with Section 4 (I) of the “Guidelines for the Operation of NIFI instruments by the CBN)”.

The determination  of the administrative charge would be based on the cost borne in providing the facility, which includes:

Communications/correspondence cost ;

Printing/stationary cost: and ,

·         The NIFI must be either in clearing and have a temporary debit balance and / or have a liquidity problem

b. Intra- day Facility (IDF)

Features:

·         CBN to provide an Intra-day Facility (IDF) for settlement same business day.

·         Authorized NIFI shall provide eligible securities as collateral for the facility.

·         The value of eligible securities shall be a minimum of 110 per cent of the value of the intra-day facility required by the NIFI. For example, if a NIFI wishes to take an IDF of N10 billion, it would be required to provide eligible security collateral worth N11 billion (that is, N10  * 1.10  = N11 billion)

·         The CBN shall specify acceptable collateral(s) from time to time, which shall include, but not limited to CBN Safe Custody Account (CSCA) Deposit, CBN Non-Interest Note (CNIN), CBN Asset-Backed Security (CBN-ABS), Sukuk (that has received regulatory treatment by the CBN), Warehouse Receipt(s) as provided in the CBN Act 2007, and any other collateral designated by the CBN that does not contravene the CBN guidelines for NIFI’s operations.

·         The operating hours for the IDF shall be between 9.00 a.m. and 2.30 p.m.

·         Repayment of the IDF shall be between the hours of 10.00 a.m.  and 3.00 p m.  each business day.

·         At termination, the transaction unwinds and the CBN receives back its funding and returns the collateral securities to the NIFI,

·         In the event of failure to repay the IDF as and when due, the CBN shall rediscount the pledged securities at par and recover the facility amount and return the net value to the NIFI.

·         The Market Support Committee (MSC) may approve an administrative charge in relation to the facility as it deems fit (in accordance with Section 4 (I) of the “Guidelines for the Operation of NIFI instruments by  the CBN)”.

The determination  of the administrative charge  would be based on the cost borne in pr0viding the facility, including but not limited to:

Communication/correspondence cost;

Printing/Stationary cost, and,

Any other direct and actual cost(s) that do not contravene the principles of non- interest banking as provided in the CBN guidelines.

Accordingly, all NIFIs licensed by the Bank are urged to note for appropriate action.