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CBN Dispels Rumors of $30bn Domiciliary Deposits Conversion Amidst Naira Instability

Boom RadioNG | February 3, 2024

The Central Bank of Nigeria (CBN) has quashed rumors circulating in the media about plans to convert $30 billion domiciliary deposits to naira. This clarification comes in the wake of speculations suggesting that such a move was being considered to stabilize Nigeria’s currency, which recently experienced its worst performance in history.

In a post on Saturday, the CBN labeled the reports as “fake news” and urged the public to disregard such unfounded speculations. This response follows the CBN’s directive to Deposit Money Banks (DMBs) to sell their excess dollar stocks by February 1, 2024, aimed at stabilizing the nation’s volatile exchange rate.

In a circular titled “Harmonization of Reporting Requirements on Foreign Currency Exposures of Banks,” the apex bank expressed concern over the increasing trend of banks holding substantial foreign currency positions. It warned against hoarding foreign currencies for profit, accusing banks of maintaining excess foreign exchange positions that expose them to risks.

The CBN outlined prudential requirements to guide banks, focusing on the management of the Net Open Position (NOP). NOP measures the difference between a bank’s foreign currency assets and liabilities. The circular mandates that NOP must not exceed 20% short or 0% long of the bank’s shareholders’ funds.

The move comes after the naira experienced its most significant decline in the official Nigerian Foreign Exchange Market on Monday, depreciating by 24% to close at N1,348 per dollar. The CBN is taking proactive measures to address issues of currency instability and ensure the prudent management of foreign currency by financial institutions.

 

 

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Written by Boom RadioNG

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