The Central Bank of Nigeria (CBN) has introduced three new Shariah-compliant financial instruments to enhance liquidity management and deepen participation in the country’s non-interest financial market, Nairametrics has reported.

The new instruments are the Nigerian Non-Interest Financial Institutions’ Master Repurchase Agreement (NNMRA), CBN Non-Interest Asset-Backed Securities (CNI ABS), and CBN Non-Interest Note (CNIN).

The move is aimed at standardising operations and providing robust liquidity options for Islamic finance institutions. The instruments are designed to align Nigeria’s Islamic banking sector with global practices while maintaining compliance with Islamic commercial jurisprudence.

This initiative addresses longstanding liquidity management constraints faced by Islamic banks, which operate without charging or paying interest. The NNMRA provides a contractual framework for repurchase transactions, enabling these banks to conduct short-term funding operations without violating Shariah rules.

It is expected to facilitate more efficient interbank transactions and improve integration with the broader monetary policy framework, Nairametric writes.

The CNI ABS and CNIN offer new avenues for liquidity absorption. The CNI ABS, backed by tangible assets, is a tradable security that enables Islamic banks to meet reserve obligations and manage surplus funds. The CNIN functions as an interest-free loan mechanism from the central bank, offering additional liquidity relief during auction windows.

Participation in these instruments is open to fully fledged Islamic banks and to conventional banks with Islamic finance windows. Access to the CBN’s discount window will be restricted on auction days to ensure separation from interest-based operations.

The rollout follows regulatory reforms and updated operational guidelines issued in 2022, with the CBN urging institutions to ensure full compliance.