The Central Bank of Nigeria (CBN) stated on Saturday that there are no plans to convert the $30 billion in domiciliary deposits to naira.
This information was disclosed in contradiction of media reports that claimed the Federal Government and the CBN were considering converting foreign currencies in domiciliary accounts into naira.
Earlier this week, the Nigerian legal tender reached its worst exchange rate in the country’s history.
Countering the misinformation, the Central Bank declared it ‘fake news’, urging the public to disregard the speculations.
The apex bank on Wednesday directed Deposit Money Banks (DMBs) to sell their excess dollar stock by February 1, 2024, as part of efforts to stabilize the nation’s volatile exchange rate.
The CBN warned banks against hoarding excess foreign currencies for profit in a circular it released on the same day.
In the circular, titled ‘Harmonization of Reporting Requirements on Foreign Currency Exposures of Banks’, the CBN raised concerns about banks holding large foreign currency positions after previously warning banks and FX dealers against false exchange rate reporting and other illegal practices.
The apex bank accused commercial banks of holding excess foreign exchange positions, giving them until February 1, 2024, to sell their excess dollars.
The CBN has noticed a rise in the foreign currency positions of banks, which has incentivized banks to hold excess long foreign currency positions, which expose them to currency and other risks, according to the circular.
The CBN outlined prudential requirements that banks must follow. These include guidelines for the management of a bank’s Net Open Position (NOP). The NOP measures the difference between a bank’s foreign currency assets and its foreign currency liabilities.
The circular states that a bank’s NOP must not exceed 20 percent short or 0 percent long of the bank’s shareholders’ funds. On Monday, the naira experienced its biggest decline in the official Nigerian Foreign Exchange Market, falling by 24 percent to close at N1,348 per dollar.
