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Market Operators Want Access to CBN’s Discount Window for Liquidity

Goddy Egene

The President, Association of Issuing Houses of Nigeria (AIHN), Mr. Sonnie Ayere has called on the Central Bank of Nigeria (CBN) to allow operators in the nation’s capital access to its Discount Window so as to facilitate a more robust and deeper financial market.

Ayere, who made the call at a forum organised by the capital market correspondents in Lagos at the weekend, noted that the operators that are regulated by the Securities and Exchange Commission (SEC) are currently shut out of the CBN discount window.

According to Ayere, who is also the Managing Director/CEO, Dunn Loren Merrifield, an investment banking group, this development is creating liquidity challenge in the capital market. He noted that without liquidity the market cannot contribute significantly to the growth of the economy.

Hence, he said the CBN should grant capital market a licence to also access liquidity and also take part in the Primary Auction Market for Treasury Bills.

“Capital Market Operators currently regulated by the SECecurities & Exchange commission are currently cut out of the Primary Auction Market for Treasury Bills. In order to facilitate a more robust and deeper financial market, we are proposing that the CBN allow capital market institutions with the requisite capital (as agreed by CBN) access to primary auctions on behalf of themselves and their customers. Discount Window access can then be given to such operators to be able to discount for liquidity purposes all instruments normally acceptable to the CBN of Nigeria,” he said.

Meanwhile, the Vice President and Divisional Head, Corporate Planning, FMDQ OTC Securities Exchange, Kaodi Ugoji, who spoke on Deepening the nation’s capital market for economic growth,” noted that the market has been affected by illiquidity, lack of regulatory framework and high focus on risk-free securities.

Ugoji added that because of illiquidity in the market companies are borrowing short term funds to finance long term projects, saying that there is need to introduce measures to enlarge the domestic institutional investors base, particularly through pension sector reforms.

According to her, the importance of a strong and viable domestic capital market as an alternative source of finance in emerging economies has been affirmed by the success it has enjoyed in countries such as Brazil, Malaysia, Russia, India and China.

“With government economic reforms running at full throttle, prospects are high for the sustained development of the Nigerian capital market as a viable tool for driving Nigeria’s economic growth,” she said.

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