18, 2020 / 1:07 PM / by CBN / Header Image Credit: Ecographics
The Central Bank of Nigeria (CBN or the Bank) developed the CBN Non-Interest Asset Backed Securities (CNI-ABS) to deepen the Nigerian financial markets, increase financial inclusion and provide a liquidity management instrument that is compliant with the principles of non-interest finance in Nigeria.
1.3 Governance Structure
The governance of the CNI-ABS shall be in accordance with the provisions of the CBN Act 2007 as amended, BOFIA 2020 as amended and relevant circulars and guidelines of the CBN.
1.4. Eligibility for Auction
Interested Non-Interest Financial Institutions (NIFIs) and any other institution, as may be approved by the CBN from time to time.
1.5. Calendar and Notices
The CBN shall issue calendar / notices of auctions, as it may determine from time to time. The CBN shall publish the calendar / notices ahead of every auction via appropriate media, inviting interested eligible institutions to bid.
The auction notice shall include the following:
a. type of auction (e.g. Dutch system)
b. tenors of securities being auctioned
c. amounts for each tenor
d. auction date
e. bidding period
f. channel by which the bids should be communicated to the CBN
g. result announcement time
h. issue / settlement date for the successful bids
i. the minimum amount for subscription, and multiples thereafter
j. CBN's right to reject any bid
1.5.1. Auction Timing
The auction shall take place on any weekday as may be decided from time to time by the CBN. The auction shall hold within any period of time as may be approved by the Bank from time to time.
1.5.2. Auction Amount
The amount at every auction shall be predetermined by the securitised amounts outstanding in the issue account or as may be decided by the CBN. The CBN may, as much as possible, offer the amounts reflected in the issuance calendar / notice. However, it reserves the right to vary the amount offered, depending on the bid amount or any other justifiable reason.
1.5.3. Auction Limit
Bidders shall not be allowed to submit multiple bids. To ensure that all NIFIs are given fair opportunity, no institution with its affiliated entities as a group may be allotted more than 25 per cent of the auction amount. This would not be applicable in situations of limited / few subscribers, where allotment shall be on a whole or pro rata basis. Page 4 of 8 Where the volume of bids exceeds the auction amount, allotment shall be on a pro rata basis, in order to maintain the maximum allocation for an auction.
1.5.4. Auction Rate
The bid applications shall not carry any rate. All successful bids shall be satisfied at a rate of return corresponding to the earnings on the underlying security. The rate of return shall be based on tenor and amount invested, and shall be subject to applicable (Wakala) charges/fees.
1.5.5. Exchange Rate
A single exchange rate shall apply (based on Wa'd) for issuing, maturity and return of each issue relative to the underlying asset and shall be determined at the beginning of each auction.
1.5.6. Submission of Bids
Bids shall be sent in the bidder's name via appropriate media as announced in the auction notice. The minimum bid amount shall be N1,000,000 and integral multiples of N1,000 in excess thereof and subject to periodic review by the Bank from time to time.
The auction notice shall state that the bidding platform shall be opened within a period of time, as may be approved by the Bank from time to time. Auction duration shall be adhered to as much as possible, however, in the event of force majeure, a contingency submission arrangement shall be put in place by the CBN.
Where there is a difficulty in sending bids by a certain time as may be decided by the Bank from time to time , the affected institution shall contact the CBN designated staff (Auction Administrator) via mail and copy the CBN ITD Service Centre. Alternatively, the institution shall submit a paper bid to FMD in Abuja, or its liaison office in CBN Lagos within the auction period. The CBN shall advise the institution of this contingency approach via a circular.
The affected institution shall execute an indemnity with the CBN, and the designated FMD staff (Auction Administrators) would be required to input the details of the bid on behalf of the affected institution.
1.5.7. Processing of Bids
The CBN may reject any defective bid, i.e. any bid that does not comply with the auction rules. Bids shall be sorted in ascending order. In the event of undersubscription, the total subscription shall be allotted as the total auction amount.
1.5.8. Auction Results
Auction results shall be announced to all market participants / CBN counterparties at the same time through electronic media. The published results shall include the following details: a. total allotment b. tenor c. maturity date Page 6 of 8 d. amount offered e. total subscription f. any other relevant information
Settlement shall be on a T+0 basis. Auction shall take place on any approved business day, while cash settlement and securities allotment shall take place on the next business day.
On the settlement day, the CBN shall:
The CBN shall be the depository of the securities.
2.0 Features of the CNI-ABS
The CNI-ABS shall have the following features:
Glossary of Islamic finance terms
Related to Non-Interest