Discount houses to recapitalize
September 14th, 2006 Ogbuotobo Chuks || chuks@stockmarketnigeria.com
Ogbuotobo Chuks
In what can be referred to as a reform, the Central Bank of Nigeria(CBN) has raised the minimum capital base of discount houses in Nigeria from N1 billion to lN3 billion. This represents an increase of about 200 percent.
In the last one year, the “reforms fever” has swept across the banking institutions, insurance companies and now the discount houses. The apex bank directed treasury bills dealers to fill new applications as a means of licensing primary market dealers. This simply accredits such an institution by CBN for the purpose of trading in money market instruments on behalf of individual and institutional investors.
In April 2004, when the guidelines for discount houses were last revised and effected, the CBN stipulated a minimum capital base of N1 billion. According to the Central Bank of Nigeria, a discount house can be defined as “any person in Nigeria who transacts a discount house business, which consists of trading in and holding treasury bills, commercial bills and other securities and whose operations are in the opinion of the CBN, those of a discount house.
Furthermore some of the objectives and principal duties of discount houses shall be;
–to promote rapid growth of the money market in Nigeria
–to act as an intermediary between the CBN and the licensed banks in OMO transactions and other eligible securities of not more than 3 years maturity as defined under the CBN’s expanded discount window guidelines
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