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Economy: CBN clarifies no plan to convert $30bn domiciliary account deposits to Naira

*The Central Bank of Nigeria states the country’s banking sector regulator has no plan to convert consumers’ $30billion domiciliary deposits to Naira, the local currency

Isola Moses | ConsumerConnect

The Central Bank of Nigeria (CBN), at the weekend, said the country’s banking sector regulator has no plan to convert $30billion domiciliary deposits to Naira, the local currency.

The CBN rebuttal must have come in response to earlier reports in some section of the media, alleging that the Federal Government and the Bank were considering the conversion of foreign currencies in domiciliary accounts of citizens to Naira to stabilise Nigeria’s currency.

ConsumerConnect learnt the exchange rate of the Naira, during the week, had recorded its worst performance in history in the Nigerian economy.

The CBN, however, dismissed the reports as “fake news” in a blogpost issued Saturday, February 3, 2024.

The Bank also urged the banking public to disregard such speculations.

It said: “No plans to convert $30bn domiciliary deposits to Naira. This news is fake!

“No plans to convert $30billion domiciliary deposits to Naira. This news is fake! – Central Bank of Nigeria (@cenbank) February 3, 2024.”

Earlier in the week, the CBN had ordered Deposit Money Banks (DMBs) to sell their excess Dollar stock latest February 1, 2024, as part of measures to stabilise Nigeria’s volatile exchange rate inducing high inflation in the West African country.

The banking sector regulator, in a circular issued January 31, 2024, and titled, “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks”, had warned domestic lenders against hoarding excess foreign currencies for profit.

The CBN equally raised concerns over the growing trend of banks holding large foreign currency positions.

It also warned banks and Foreign Exchange (Forex) dealers against reporting false exchange rates, among others.

The CBN accused banks of holding excess foreign exchange positions.

It gave lenders until February 1, 2024 to sell off excess Dollars in their vault.

It stated: “The Central Bank of Nigeria has noted with concern the growth in foreign currency exposures of banks through their Net Open Position (NOP).

“This has created an incentive for banks to hold excess long foreign currency positions, which exposes banks to foreign exchange and other risks.”

The CBN also issued prudential requirements that banks must follow.

A key focus of these requirements is the management of the Net Open Position (NOP), which 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 circular mandates 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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