15 August 2022

Regulatory Update: The Revised Guidelines For The Operation Of Non-Interest Financial Instruments By The Central Bank Of Nigeria

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On June 9 2022, the Central Bank of Nigeria ("CBN") issued the "Revised Guidelines For The Operation of Non-Interest Financial Institutions' Instruments by the Central Bank of Nigeria" (the "Guidelines")...
Nigeria Finance and Banking
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On June 9 2022, the Central Bank of Nigeria ("CBN") issued the "Revised Guidelines For The Operation of Non-Interest Financial Institutions' Instruments by the Central Bank of Nigeria" (the "Guidelines") to enhance their operations, respond to developments in the banking sector, and to provide uniform rules for accessing non-interest financial instruments.

What are Non-Interest Instruments?

Non-Interest Instruments ("NIIs") are interest-free financing facilities granted by the CBN to Non-Interest Financial Institutions ("NIFIs") by way of an incentive to ensure that they maintain liquidity for granting non-interest loans.

Who can access Non-Interest Instruments?

They are available to NIFIs ie., Non-interest Banks (NIB) (e.g, Jaiz Bank, Lotus Bank and Taj Bank) and deposit money banks with non-interest banking window (e.g. Sterling Alternate Finance, Suntrust Bank). In addition, a deposit money bank wishing to gain access to NIIs may apply to the CBN for access to the non-interest banking window.

What are the conditions for obtaining NIIs?

NIFIs are required to fulfil the following conditions;

  1. Appoint and authorize two dedicated representatives who shall be responsible for initiating and consummating transactions on the non-interest banking window.
  2. Initiate each transaction in the prescribed format including through emails, letters, Real-time Gross Settlement (RTGS) and Scripless Securities Settlement System (S4).
  3. Refer disputes arising from the operations of the Guidelines to the Director of the Financial Markets Department within the CBN.

Which NIIs are available under the Guidelines?

1. CBN Safe Custody Account ("CSCA")

The CSCA allows participants to deposit excess funds in their possession with the CBN, for a period of 3 or 7 days. The CBN may in return pay returns on the deposit to the participating institutions considering: (i) the prevailing monetary policy and liquidity conditions in the banking system; (ii) the deliberation and decisions of the Market Support Committee of the CBN; (iii) the size of the deposit; (iv) prevailing conventional banking conditions; and (v) alternative investment options.

2. CBN Non-interest Note ("CNIN")

The CNIN is a financial paper issued by the CBN as evidence that an interest-free loan, which must be a minimum of N100 million, was issued by the participating institution to the CBN. The CNIN, then entitles the participating institution to subsequently obtain interest-free loans from the CBN within 12 months after the maturity of the initial interest-free loan to the CBN. The issuance of such interest free-loans by the CBN shall also be subject to liquidity needs of the participating bank.

3. CBN Non-Interest Asset-Backed Securities ("CNI-ABS")

Typically, the CBN invests in Islamic financial certificates issued by multilateral financial institutions (Sukuk). Subsequently, the CBN may auction a portion of its interest in the Sukuk to participating banks by way of a CNI-ABS. The duration of the CNI-ABS shall be based on the duration of the underlining asset (the asset under the Sukuk). The CBN shall thereafter, allocate earnings received on the securitized asset (the asset under the Sukuk) to the participating institutions based on their financial participation in the auction, (less its agency fee).1

The minimum investment into the CNI-ABS shall be 100 million Naira and shall be tradable in the money market and the secondary market.

4. The CBN Non-Interest Special Bills ("CNI-SB")

The CNI-SB is issued by the CBN to a participating institution subject to an interest-free loan which the CBN must have obtained from the Cash Reserve Requirement Account of the participating institution. In this case, the participating institution is subsequently entitled to borrow 10% of the value of the loan previously issued by the participating bank for 1/3 of the tenure of the initial loan.

5. Intra-day Facility ("IDF")

The IDF provides interest-free funds to the participating institution for 1 business day to avoid the gridlock on the settlement system. The IDF shall be provided on the same day of request, and shall be secured by a collateral approved by the CBN and valued at 120% of the loan.

6. Funding for Liquidity Facility ("FfLF")

The FfLF provides an overnight facility to participating institutions for short-term liquidity. The facility will be secured by a collateral and will be terminated by the next business day. A participating institution may convert an IDF to an FfLF, subject to rules of the CBN.


Non-interest banking was introduced in 2011 to grow the Nigerian financial system, encourage financial inclusion and provide alternative investment and financing options. The issuance of the Guidelines will encourage investments in the non-interest banking sector.


1. The CBN also issued the Framework for the operationalization of the Central Bank of Nigeria Non-Interest Asset Backed Securities, which provides clarity on the operation of the CNI-ABS.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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