The Central Bank of Nigeria (CBN) has introduced three new financial instruments aimed at deepening the country’s non-interest financial market and helping Islamic finance institutions manage liquidity better.
This move was announced in a circular dated May 23, 2025, as part of CBN’s ongoing efforts to promote non-interest banking in Nigeria’s financial system and bring it up to international standards. The instruments introduced include 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 circular, these tools are expected to make it easier for Islamic banks and other non-interest financial institutions to manage short-term liquidity without violating the rules of Shariah. For years, non-interest banks in Nigeria have had very few options when it comes to managing excess funds or borrowing money quickly without using interest-based methods, which are forbidden under Islamic law.
The NNMRA is a master agreement that provides a standard format for carrying out repurchase transactions in the non-interest market. Normally, in conventional banking, a repo is a short-term loan where banks sell securities and agree to buy them back later at a higher price. But since interest is not allowed in Islamic finance, the NNMRA offers an alternative structure that allows for similar transactions without interest. It spells out the roles and responsibilities of both the CBN and participating banks, including those with Islamic windows.
The CBN believes this new agreement will help banks manage their cash more effectively and support interbank transactions between Islamic and conventional players without mixing interest-based and non-interest-based operations. It is a step towards integrating Islamic finance into Nigeria’s mainstream monetary policy framework.
In addition to the NNMRA, the central bank also launched two new liquidity management tools — the CBN Non-Interest Asset-Backed Securities (CNI-ABS) and the CBN Non-Interest Note (CNIN). The CNI-ABS is a tradable instrument backed by real assets, and it follows the rules of Islamic finance. It allows Islamic banks to invest surplus funds in a Shariah-compliant way and also helps them meet the cash reserve requirements set by the CBN.
The CNIN, on the other hand, is a kind of interest-free loan provided by the central bank to Islamic financial institutions through periodic auctions. This gives banks another way to manage their liquidity without going against Shariah rules. Both instruments will be auctioned regularly by the central bank, and they are designed to give non-interest banks reliable tools for daily operations.
The circular made it clear that only licensed non-interest banks and conventional banks with Islamic windows are allowed to use these instruments. It also reminded participants to follow the existing rules and guidelines, especially the Revised Guidelines for the Operation of Non-Interest Financial Institutions’ Instruments issued in 2022. On days when the CBN holds auctions for the CNI-ABS and CNIN, participants will not be allowed to use the regular discount window, to ensure a clean separation between Islamic and conventional banking practices.
With these new tools, the CBN hopes to increase the participation of Islamic financial institutions in Nigeria’s financial markets. This is also expected to help in attracting more investments from regions and investors that prefer Shariah-compliant finance.
Islamic banking in Nigeria has been growing steadily, with more banks setting up non-interest windows and offering products that comply with Islamic principles. However, liquidity management has remained one of the biggest challenges for the sector, especially when compared to conventional banks that have more established tools and support systems.
By introducing these new instruments, the CBN aims to level the playing field and support the continued growth of the non-interest banking sector in Nigeria. It also shows the bank’s commitment to promoting financial inclusion by catering to diverse financial needs and beliefs within the country.
