NO QUOTATION,NO MORE COMMERCIAL PAPERS SAYS CBN


The Central Bank of Nigeria (CBN) has asked banks and discount houses in Nigeria not to be involved in the issuance of commercial papers (CPs) in whatever capacity unless such is quoted or is intended to be quoted with an authorised securities exchange in Nigeria.

According to a circular signed by A. O Idris for Director, Banking supervision dated July 12 2016, banks and discount houses are "now only permitted to deal in commercial papers that are registered on an Authorised securities exchange with effect from July11, 2016".

"Accordingly" the CBN declared "banks are prohibited from transacting in CPs (that are not quoted on an Authorised securities exchange) in any capacity whatsoever including but not limited to as issuer; guarantor; issuing, placing; paying and collecting agent (IPPCA), collecting and paying agent (CPA) etc from the effective date."

Then it added "The CBN having approved the quotation rules of FMDQ OTC Securities Exchange has cleared it for the quotation
of CPs in Nigeria. Deposit money banks and discount houses would be updated on subsequent clearance of additional securities exchange from time to time".

This is a clear deviation from the procedure in existence since November 19 2009 when the CBN issued formal guidelines for the issuance of bank acceptances and commercial papers. Under the 2009 guidelines, the CBN only said that "all CPs issued in Nigeria shall be registered with the Central Securities Clearing Systems (CSCS) which shall serve as a central depository for all dematerialised instruments".

Other procedures and rules established by the 2009 circular remain intact though including express provisions that defined bankers acceptances and commercial papers; established conditions for creating them; documentation, rating, tenor, limits and amount; and procedure for issuance amongst others.

The 2009 guidelines clearly stated that these financial documents can be invested in and so be held by individuals, banks, corporate organisations; unincorporated bodies; non resident Nigerians and foreign institutional investors.

It also clearly stated that limits to BAs and CPs should be 150% of shareholders fund for banks and 300% of shareholders fund for discount houses to the extent they are unimpaired by any losses especially of the accumulated or capital kind. 

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