CBN Orders Banks to Sell Excess Dollars in 24 Hours

Amid its fresh moves to stabilise the nation’s volatile exchange rate, the Central Bank of Nigeria, CBN has ordered Deposit Money Banks to sell their excess dollar stock latest today, February 1, 2024.

The CBN, which disclosed this in a new circular released on Wednesday, also warned lenders against hoarding excess foreign currencies for profit.

According to officials, the central bank believes some commercial banks hold long-term foreign exchange positions to enable them profit from the volatile movements of exchange rates.

The new circular introduces a set of guidelines aimed at reducing the risks associated with these practices.

In the circular, the CBN raised concerns over the growing trend of banks holding large foreign currency positions.

The latest circular came barely 48 hours after the CBN released a circular, warning banks and FX dealers against reporting false exchange rates, among others.

The new development also came on the heels of the adjustment of the methodology used for the calculation of the nation’s official exchange rate by the FMDQ Exchange.

The review has pushed the Nigerian Autonomous Foreign Exchange Market rate from approximately N900/dollar to N1,480/dollar. The naira closed at 1,450/dollar at the parallel market on Tuesday.

The move which is aimed at unifying the official and parallel market exchange rates has been hailed by economists and other stakeholders.

They however challenged the CBN to clear FX backlogs estimated at over $5bn and also fund FX demands at the official market.

This, they said, would forestall a situation whereby the parallel market rate would move away from the official rate again.

Apparently as part of the moves to fund FX request at the official window, the CBN in its latest circular released on Wednesday accused banks of holding excess foreign exchange positions.

As a result, the central bank gave lenders until February 1, 2024 (today) to sell off excess dollar positions.

The circulated, dated January 31, 2024, was signed by the Director, Trade and Exchange, CBN, Dr. Hassan Mahmud, and representative of the Director, Banking Supervision, CBN, Mrs. Rita Sike.