In a significant move to broaden the scope and efficiency of Nigeria’s non-interest financial market, the Central Bank of Nigeria (CBN) has introduced three innovative financial instruments designed to enhance liquidity management for Islamic finance institutions.
Disclosed in a circular dated May 23, 2025, and signed by Okey Umeano, Acting Director of the Financial Markets Department, the new tools mark a transformative step in Nigeria’s journey towards a more inclusive and diversified financial system. These instruments are: the Nigerian Non-Interest Financial Institutions’ Master Repurchase Agreement (NNMRA), the CBN Non-Interest Asset-Backed Securities (CNI-ABS), and the CBN Non-Interest Note (CNIN).
According to the CBN, these tools are aimed at standardising market practices, boosting participation, and aligning Nigeria’s Islamic finance infrastructure with international best practices. The circular was made public via the apex bank’s official website and forms part of its broader agenda to deepen financial inclusion while respecting the ethical framework of Islamic banking.
One of the most notable additions is the NNMRA, a structured legal agreement that governs repurchase transactions in non-interest financial markets. This agreement is tailored to meet the unique needs of Islamic financial institutions, offering a Shariah-compliant approach to short-term funding that avoids the use of interest-bearing instruments.
Historically, Islamic banks in Nigeria have faced significant limitations when it comes to managing liquidity within the constraints of Islamic finance principles. The introduction of the NNMRA addresses this challenge by providing a globally accepted and legally binding framework for repo transactions. It defines the responsibilities of all parties involved — including Islamic banks and the CBN — and is expected to enable smoother interbank operations within the non-interest banking segment.
The CBN has also launched two new liquidity instruments — the CNI-ABS and the CNIN — both of which will be issued through periodic auctions to eligible participants.
The CNI-ABS is a tradable security backed by tangible, Shariah-compliant assets. It allows Islamic banks to manage excess liquidity while complying with reserve requirements. The asset-backed nature of the CNI-ABS makes it a viable alternative to conventional interest-based tools and positions it as a key pillar in Islamic liquidity management.
Complementing this is the CBN Non-Interest Note (CNIN), an interest-free financial instrument that provides temporary liquidity support between the apex bank and participating non-interest financial institutions. It is intended to serve as an additional liquidity channel, particularly for absorbing excess funds during monetary tightening cycles.
The CBN has mandated that all authorised non-interest financial institutions — including full-fledged Islamic banks and conventional banks with Islamic finance windows — integrate these instruments into their operations. These institutions are expected to adhere strictly to existing operational guidelines and circulars.
To maintain the ethical separation between Islamic and conventional banking systems, participants will not be allowed to access the CBN’s traditional discount window on auction days for CNI-ABS and CNIN. This provision is intended to preserve the integrity of non-interest financial transactions and reinforce compliance with Islamic financial jurisprudence.
Financial experts have commended the move as a milestone in the evolution of Nigeria’s financial architecture. Dr. Ahmad Rufai, an Islamic finance analyst, noted, “This is a long-awaited development that not only supports liquidity management but also signals CBN’s commitment to deepening non-interest financial services. It could attract more investors to Nigeria’s Islamic finance space.”
Nigeria, with its large Muslim population and increasing demand for Shariah-compliant financial services, stands to benefit significantly from the deepening of Islamic finance. The move also enhances Nigeria’s profile in the global Islamic finance market, positioning it alongside countries like Malaysia, Saudi Arabia, and the United Arab Emirates that have well-developed Islamic financial sectors.
As the Central Bank continues its reform efforts, the introduction of these three instruments represents a decisive step towards building a more inclusive and resilient financial ecosystem in Nigeria. By providing non-interest financial institutions with efficient and compliant tools for liquidity management, the CBN is paving the way for the sustainable growth of Islamic finance in the country.