The Central Bank of Nigeria clarified that there is no intention to convert holdings in domiciliary accounts into naira.
This announcement was made by the financial regulator in a statement signed by its Acting spokesperson, Sidi Ali, on Saturday.
The statement highlighted that the bank is exerting considerable efforts to stabilize the foreign exchange market, a commitment demonstrated through recent actions and policy orientations.
The apex bank assured the citizens of Nigeria that its ongoing efforts are focused on instilling confidence in the economy, with a firm commitment not to act in a contrary manner.
“We want to assure the general public that CBN is working to build confidence and would never do anything to undermine the currency and the economy,” the statement read.
The CBN added that “the bank is the only designated authority for monetary policy changes and will always advise on any policy change(s) before they are brought into operation. The CBN is always open to answer questions about our policies.”
Previous reports suggested that the Federal Government is contemplating a policy shift that could lead to the conversion of foreign currencies in citizens’ domiciliary accounts to naira. The aim is to stabilize the national currency, which recently witnessed its most significant decline in history.
Read more: Naira Regains Strength As Banks Offload Excess Dollars
The newspaper’s report indicated that the government is considering a plan, and if executed, it could entail instructing the conversion of unused foreign currencies in domiciliary accounts of individuals and corporate entities to naira. The conversion rate would be decided by the Central Bank of Nigeria (CBN).
The Central Bank of Nigeria (CBN) voiced apprehension regarding the escalating foreign currency exposures of banks, particularly through their Net Open Position.
The apex bank made this disclosure in a circular addressed to all banks, bearing the signatures of its Director, Trade and Exchange, Dr. Hassan Mahmud, and the Director, Banking Supervision, Mrs. Rita Sike.
The bank noted that “such foreign currency positions expose banks to foreign exchange and other risks.”
CBN stated that to ensure that these risks are well managed and avoid losses that could pose material systemic challenges, it has issued new prudential requirements for banks to comply with.
In adherence to the Gross Aggregate Method, the central bank stipulates that the Net Open Position limit for total foreign currency assets and liabilities—encompassing on and off-balance sheet aspects—should not surpass 20% short or be 0% long concerning shareholders’ funds unimpaired by losses.
It is mandated that banks, with a current Net Open Position exceeding 20% short and 0% long of their shareholders’ funds unimpaired by losses, bring them in line with the prudential limit by February 1, 2024.
The directive includes the obligation for banks to employ approved templates when calculating their daily and monthly Net Open Position (NOP) and Foreign currency trading position.