CBN Introduces Bills To Mop Up Surplus Funds

The Central Bank of Nigeria (CBN) has introduced special bills as part of an effort to absolve excess liquidity and deepen the financial market, saying the move will avail it with an additional liquidity management tool.

The circular announcing the special bills was signed by Bello Hassan, Director of Banking Supervision.

The CBN said the features of the CBN Special Bills are Tenor of 90 days; Zero coupon, applicable yield at issuance will be determined by the CBN; the instrument will be tradable among banks, retail and institutional investors; and the instrument shall not be accepted for repurchase agreement transactions with the CBN and shall not be discountable at the CBN window.

Also, the instrument will qualify as liquid assets in the computation of liquidity ratio for Deposit Money Banks (DMBs).

The CBN further noted that it would continue to ensure optimal regulation of systemic liquidity and promote efficient financial markets in support of economic recovery and sustained growth.

Commenting, Prof. Uche Uwaleke, an economist and financial expert, said, “The CBN is being innovative by creating a new liquidity management tool in a manner that supports economic recovery.”

He said the CBN Special Bills were in connection with DMBs’ excess cash reserves.

Prof. Uwaleke explained that, “The idea of securitising excess cash reserves balances; that is converting cash deposits of banks with the CBN above the 27.5 per cent reserve requirements, into tradable 90-day securities will improve the liquidity position of DMBs and is in the interest of financial sector stability, especially against the backdrop of the fact that cash deposited with the CBN by way of statutory requirements is not remunerated.”