HIGHLIGHT
CBN has issued a directive to all dealers securities in Nigeria that Standing Lending Facilities (SLF) must now be bought back within a period not later than 10.00 a.m. of the maturity date of such securities.
Central Bank of Nigeria (CBN)
The Central Bank of Nigeria (CBN) yesterday issued a new directive to all dealers of securities in the country.
Against its previous stance on securities settlement in the Nigerian securities market, the bank directed that all Standing Lending Facilities (SLF) must now be bought back within a period not later than 10.00 a.m. of the maturity date of such securities.
“Henceforth, all Standing Lending Facilities (SLF) must be bought back latest by 10.00 a.m. on the maturity date, failing which, the encumbered securities will be automatically rediscounted,” the apex bank said in a circular tagged: amendment of S4 business rules and guidelines that was posted on its website yesterday. The circular takes immediate effect.
Under section 10.1 of the amended S4 business rules and guidelines, the securities dealers were required to settle any auction or 2-way-quote with the CBN. If on queue, it was given highest priority and when it failed to settle, the system would generate an automatic Intra-day Liquidity Facility (ILF) backed by collateral to settle the transaction. In the case of no securities, the allotment was cancelled and defaulter suspended from all auctions for eight weeks.
The old arrangement ensured that ILF was bought back or converted to SLF by the participant by the close of business day, failure of which automatically converted to SLF at the prevailing SLF rate plus 500 basis points.
In the case that any SLF was not repurchased by the participant by the next business day, such participants were not allowed to have access to CBN’s discount window until such outstanding obligation is settled in in accordance with section 27 of the guidelines for the Conduct of Repurchase Transactions under the apex bank’s standing facilities.
Meanwhile, the apex bank yesterday sold $660 million in three- and five- month currency forwards at an auction aimed at clearing a backlog of dollar demand, as the value of the currency dropped at the interbank market.
The naira which has sold around N305 to the dollar at the interbank market for weeks dropped in value to N315 yesterday, while at the parallel market, it gained N2 to sell at N496 to the dollar.
Last week Wednesday, the apex bank had asked commercial lenders to bid in a special currency auction targeted at clearing backlog of dollar obligations of manufacturing, airlines, agriculture and petroleum sector. Traders said the results of the auction were announced late Tuesday while payment for the dollar sales is due on Wednesday.
This is the first major dollar sales to the key sector by the CBN this year in a bid to spur growth and revive Africa’s biggest economy which slipped into recession last year due to currency crisis necessitated by drop in global oil prices.
