In a bid to stabilize Nigeria’s volatile exchange rate, the Central Bank of Nigeria (CBN) has directed Deposit Money Banks to sell their excess dollar stock by February 1, 2024. The CBN issued a new circular warning banks against hoarding excess foreign currencies for profit, expressing concerns over the growing trend of banks holding large foreign currency positions.
Titled “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks,” the circular emphasized the need for banks to maintain adequate stocks of high-quality liquid foreign assets, such as cash and government securities, in each significant currency. The CBN’s directive follows its recent warning to banks and FX dealers regarding false exchange rate reporting.
The CBN believes that some commercial banks hold long-term foreign exchange positions to profit from volatile exchange rate movements, a practice the central bank aims to curb through the directive. Banks failing to comply with the Net Open Position (NOP) limit set by the CBN risk immediate sanction and suspension from the foreign exchange market.
Source: Parrot Nigeria News