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To strengthen naira, CBN directs banks to dispose surplus dollars within 24 hours
The Central Bank of Nigeria has issued a directive to Deposit Money Banks, ordering them to dispose of their surplus dollar stocks by the latest February 1, 2024, as part of its efforts to stabilise the nation’s fluctuating exchange rate.
In a new circular released on Wednesday, the CBN admonished banks against hoarding excess foreign currencies for profit, expressing concerns over the increasing trend of banks holding substantial foreign currency positions.
Furthermore, the central bank emphasised that some commercial banks maintain long-term foreign exchange positions to capitalise on the volatile movements of exchange rates, thus introducing a set of guidelines to mitigate associated risks.
This latest directive follows a similar warning issued by the CBN to banks and FX dealers regarding the reporting of false exchange rates, and comes amidst the adjustment of the calculation methodology for Nigeria’s official exchange rate by the FMDQ Exchange.
This review has led to a significant shift in the official exchange rate from approximately N900/dollar to N1,480/dollar, with the naira closing at 1,450/dollar at the parallel market on Tuesday.
Economists and stakeholders have lauded the move aimed at unifying official and parallel market exchange rates, while also urging the CBN to address the backlog of FX demands, estimated to be over $5 billion, in the official market.
They highlighted the importance of preventing a widening gap between the official and parallel market rates.
In an effort to manage FX requests in the official window, the CBN, through a circular dated January 31, 2024, instructed banks to sell off excess dollar positions by February 1, 2024.
The circular was signed by the Director of Trade and Exchange, Dr. Hassan Mahmud, and a representative of the Director of Banking Supervision, Mrs. Rita Sike, stressing the need to address concerns regarding banks’ foreign currency exposures and associated risks.
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