CBN orders banks to sell excess dollars in 24 hours

CBN orders banks to sell excess dollars in 24 hours

CBN orders banks to sell excess dollars in 24 hours

The Central Bank of Nigeria (CBN) on Wednesday,  Jan. 31, imposed limits on how much banks can hold in foreign currencies.

 

The apex bank expressed concern about the growth of forex exposures on their balance sheets following the naira’s tumble against the US dollar.

 

The Senate, on Wednesday, through its Committee on Banking, Insurance and other Financial Institutions, summoned the Governor of Central Bank of Nigeria, Olayemi Cardoso, to appear before it on Tuesday next week to answer questions on the state of the economy and the free fall of naira in the forex market.

 

The Committee, chaired by Senator Adetokunbo Abiru (APC Lagos East), met on Wednesday when the naira plummeted to N1,520 to a US dollar.

 

Recall that the naira fell to a record low on the official market on Tuesday, slipping below the unofficial parallel market rate after market regulator FMDQ Exchange changed its closing rate calculation methodology for the naira. Its dollar-denominated sovereign bonds also suffered sharp falls.

 

Troubled by the situation of the economy, the lawmakers held an emergency session to salvage the inflation rate.

 

Speaking with journalists after the meeting held behind closed doors,  Abiru said the state of the economy, especially the inflation index, was of great concern to the lawmakers.

 

He said, “We have held a meeting this afternoon essentially to focus on the direction of the Nigerian economy.

 

“We are all living witnesses of what is going on. Underlining the major issue of the economy is the way the inflation index has been and of course, it is a major concern to us.

 

“We have deliberated among ourselves. Critical issues were addressed and we believe that the next line of action is to summon the Governor of the Central Bank on Tuesday at 3 O’clock to brief us properly on the state of the economy.

 

“That we have resolved and will communicate to the Governor of the Central Bank after which we will have further communication with members of the press.”

 

Following the meeting, the CBN has now introduced a limit on lenders’ net open positions of 20% of shareholders’ funds for short positions and a zero limit for long positions and ordered banks to harmonise reporting, according to a circular released on Wednesday, Jan. 31.

 

Previously, lenders were not allowed to have open positions on the dollar, meaning they could not buy foreign exchange on their own account from the market or speculate on the value of the currency.

 

The regulator noted that excess net open dollar positions on banks’ balance sheets have incentivized lenders to hold foreign currency, thereby exposing them to currency and other risks.

 

Banks are now required to bring their exposures within the set limits immediately or face sanctions, including suspension from the currency market.

Check Also

FG drags 36 governors to Supreme court over LGAs autonomy

FG drags 36 governors to Supreme court over LGAs autonomy

The Federal Government has dragged the 36 state governors to the Supreme Court over alleged …

Leave a Reply