CBN Releases 3 New Management Tools for Islamic Banks in Nigeria

• The CBN has announced the rollout of three new instruments specifically tailored for non-interest financial institutions
• The apex bank hopes that the new bank’s broader strategy to strengthen the adoption and operational efficiency of non-interest banking
• There are three fully-fledged Islamic banks and two conventional banks operating Islamic banking options

Legit.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.

The Central Bank of Nigeria has introduced a set of new liquidity management instruments to support non-interest financial institutions, also known as Islamic banks.

This was disclosed in a circular dated May 23, 2025, released on the apex bank website.

According to the circular, the latest tools are part of the apex bank’s broader strategy to strengthen deepening market participation and strengthen Islamic finance instruments across the country’s financial system.

CBN push for more adoption of non-interest banking

The instruments unveiled by the Central Bank 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).

The CBN said the new tools are designed to standardise market practices, boost participation, and align Nigeria’s Islamic finance landscape with international standards.

Part of the circular reads:

"The Nigerian Non-Interest Financial Institutions’ Master Repurchase Agreement is a contractual framework that aims to regulate and standardise the conduct of repurchase (repo) transactions within the non-interest banking space."

Breakdown of the new tools introduced by the CBN

According to the CBN, the agreement is designed to offer a comprehensive and globally accepted framework that clearly outlines the roles and responsibilities of all counterparties, including the Central Bank itself.

The bank stated:

“This framework is essential to instil confidence in non-interest repo operations and to provide a robust platform that encourages broader participation."

In addition, the Central Bank rolled out the CBN Non-Interest Note (CNIN), an interest-free loan arrangement between eligible financial institutions and the CBN.

The CNIN provides an alternative channel for managing liquidity through scheduled auctions and is designed to complement the existing range of non-interest financial instruments. It also offers greater flexibility for institutions seeking short-term liquidity support within a Shariah-compliant framework.

The CBN explained:

“The CNIN is not only a compliance-friendly tool but also a strategic instrument to broaden access to non-interest liquidity solutions.”

BusinessDay reports that market participants have been urged to refer to the Revised Guidelines for the Operation of Non-Interest Financial Institutions’ Instruments by the Central Bank of Nigeria, 2022, for detailed information on the operational procedures and regulatory requirements tied to these instruments.

The CBN also called on all eligible and authorised participants to proactively incorporate the new tools into their liquidity management strategies.

All you need to know about Islamic banking

Earlier, Legit.ng reported that the Central Bank of Nigeria approved the operation of the Islamic banking model in the country with five licensed to serve Nigerians

The banks are distinct from traditional commercial banks as they offer interest-free loans to MSMEs and individuals.

Jaiz Bank was the pioneer of this banking approach in Nigeria, providing customers with the opportunity to earn profits from their savings.

Source: Legit.ng