The Central Bank of Nigeria, CBN, has accused commercial banks in the country of profiting from the problem facing the naira.
The Cardoso-led government bank on Wednesday said commercial banks are hoarding forex with the intention of selling at higher price. The development, it said, has led to the consistent decline in the value of naira to the dollar.
The banks have now been directed to adjust “their positions to comply with the new regulations by February 1, 2024,” as part of the ongoing efforts by the CBN to stabilize the volatile forex market.
The directive was contained in a statement signed by Directors of Trade and Banking Supervision Hassan Mahmud and Rita Sike today in Abuja, the nation’s capital.
The development comes on the heels of Senate summons of the CBN Governor, Yemi Cardoso to appear before it to explain the ‘free fall’ of the naira, whose value has declined by at least 40 percent in the last two days against the American dollar.
The currency was traded N1,520 to the dollar today at the parallel market.
Tokunbo Abiru, the Senate Committee Chairman on Banking said on Wednesday that Cardoso has some explanation to make concerning the misfortune that has hit the naira recently.
In the circular titled, ‘Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks, the apex bank said banks must put an end to currency speculation and hoarding by calculating “their daily and monthly NOP and Foreign Currency Trading Position (FCT) using specific templates provided by the CBN”.
The apex bank said: “The Central Bank of Nigeria (CBN) has noted with concern the growth in foreign currency exposures of banks through their Net Open Position (NOP). This has incentivized banks to hold excess long foreign currency positions, which exposes banks to foreign exchange and other risks.
“Therefore, the CBN issues the following prudential requirements to ensure these risks are well managed and avoid losses that could pose material systemic challenges.”
“For example, a bank borrows or buys $ 1 million worth of forex but then holds half of it in its position instead of lending it or using it to finance purchases for its clients immediately.
“What this means is that banks can profit from currency depreciation if they buy the forex low and sell high”, the apex bank said.
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