CBN orders banks to sell all excess dollars in their domains today

The Central Bank of Nigeria (CBN) has ordered commercial banks in the country to sell all excess dollars within their domains latest today, 1 February 2024.

This is contained in a circular issued by the apex bank to all commercial banks in the country.

The circular said the CBN had noted with concern the growth in foreign currency exposures of banks through their Net Open Position (NOP).

The NOP measures the difference between a bank’s foreign currency assets (what it owns in foreign currencies) and its foreign currency liabilities (what it owes in foreign currencies).

The CBN said this has created an incentive for banks to hold excess long foreign currency positions, which exposed banks to foreign exchange and other risks.

The circular ordered that the NOP must not exceed 20 per cent short or 0 per cent long of the bank’s shareholders’ funds.

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According to the CBN, this calculation must be done using the Gross Aggregate Method, which provides a comprehensive view of the bank’s foreign currency exposure.

It added that banks with current NOPs exceeding these limits were required to adjust their positions to comply with the new regulations latest by February 1, 2024.

The apex bank added that banks must calculate their daily and monthly NOP and Foreign Currency Trading Position (FCT) using specific templates provided by the CBN.

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The CBN also directed banks to maintain adequate stocks of high-quality liquid foreign assets, such as cash and government securities, in each significant currency.

According to the circular, all banks are required to adopt adequate treasury and risk management systems to provide oversight of all foreign exchange exposures and ensure accurate reporting on a timely basis.

The CBN stated that the banks were expected to bring all their exposures within the set limits immediately and ensure that all returns submitted to the CBN to provide an accurate reflection of their balance sheets.

It warned banks that non-compliance with the NOP limit would result in immediate sanction and suspension from the foreign exchange market.