CBN orders banks to sell excess dollars in 24 hours

The Central Bank of Nigeria (CBN) on Wednesday, January 31, introduced limits on the amount of foreign currency that banks can hold.

Apex banks have expressed concern over the increased foreign exchange exposure on their balance sheets following the sharp depreciation of the naira against the US dollar.

The Senate, through the Banking, Insurance and Other Financial Institutions Committee, on Wednesday summoned the Governor of the Central Bank of Nigeria, Olayemi Cardoso, to appear before the Senate next Tuesday to answer questions from the Civil Liberties and Civil Rights Committee on the state of the economy. Ta. Naira depreciation in the foreign exchange market.

The committee chaired by Senator Antetokunbo Abiru (APC Lagos East) met on Wednesday as the Naira plummeted to 1,520 Naira to the US dollar.

Recall that the naira fell below the unofficial parallel market rate to an all-time low in the official market on Tuesday after market regulator FMDQ Exchange changed the way it calculates the closing price of the naira. US dollar-denominated government bonds also suffered heavy losses.

Concerned about the economic situation, lawmakers called an emergency meeting to try to curb inflation.

Speaking to reporters after the closed-door meeting, Abiru said the economic situation, especially the inflation index, was a major concern for the members.

He said: “We held a meeting this afternoon basically on the direction of the Nigerian economy.

“We are all living witnesses of what is happening. The main issue in the economy is the evolution of the inflation index, which is of course a big concern for us.

” We have talked about it. There are important issues being raised and we think the next action is to invite the central bank governor at 3pm on Tuesday to give a proper briefing on the economic situation.

“We have decided on this and will communicate this to the central bank governor and then further communication with the press.”

After the meeting, the CBN has now set a cap on net open positions for lenders. A circular issued on Wednesday, March 1, said it had instructed banks to introduce a 20% limit on shareholder funds for short positions, a zero limit on long positions, and harmonize reporting. 31.

Previously, lenders were not allowed to hold positions in dollars, meaning they could not buy foreign currencies on their own accounts in the market or speculate on the value of the currency was.

Regulators have found that excessive net open dollar positions on banks’ balance sheets induce lenders to hold foreign currencies and expose them to currency and other risks.

Banks are now obliged to immediately maintain their exposures within set limits or face sanctions, including exclusion from the foreign exchange market.