The Central Bank of Nigeria has increased the minimum bid for non-interest asset-backed securities to N100,000,000 from N1,000,000 seen in the exposure draft it issued in 2020.
This was revealed in a CBN circular signed by Angela Sere-Ejembi (PhD), Director, Financial Markets Department of the CBN, titled“FRAMEWORK FOR THE OPERATIONALISATION OF THE CENTRAL BANK OF NIGERIA NON-INTEREST ASSET BACKED SECURITIES,” and issued in June 2022.
The CBN Non-Interest Asset-Backed Securities (CNI-ABS) was created to deepen Nigerian financial markets, enhance financial inclusion, and provide a liquidity management instrument that adheres to Nigeria’s non-interest finance principles.
The CBN said, “Further to the Guidelines for the Operation of Non-Interest Financial Institutions’ Instruments by the Central Bank of Nigeria, released in December 2012 the Central Bank of Nigeria (or the Bank) notes the positive developments in the financial markets environment and the need to strengthen the policy arena.”
“Consequently, the Bank hereby releases the Framework for the Operationalisation of the Central Bank of Nigeria Non-Interest Asset Backed Securities. Thus, non-interest banks and other authorized dealers in the non-interest banking window at the CB are required to note for guidance accordingly.”
The CBN also increased the minimum bid for non-interest asset-backed securities. “Bids shall be sent in the bidder’s name via appropriate media as announced in the auction notice. The minimum bid amount shall be N100,000,000 and integral multiples of N1,000,000 in excess thereof, subject to periodic review by the Bank from time to time,” the CBN said.
The amount at each auction is to be set by the outstanding securitized amounts in the issue account, or by the CBN. However, only licensed non-interest banks, deposit money banks with a non-interest banking window, and any other licensed financial institution are eligible to participate in the auction.
The Central Bank of Nigeria (CBN) has stated that investors in its Non-Interest Asset Backed Securities will be charged Agency (Wakala) fees. The apex agency (Wakala) fees are as follows: an underlying return for 1 to 30 days investment (10%); 31 to 90 days (7.5%); 91 to 180 days (5%); and 181 to 365 day (2.5%).