The Central Bank of Nigeria (CBN) has ordered Deposit Money Banks (DMBs) to sell their excess dollar stock at today’s trading, following its assessment that some hold excess levels of foreign currencies according to the rules. The CBN expressed concern over banks holding large foreign currency positions, which it believes are aimed at profiting from exchange rate fluctuations. To address this, the CBN issued guidelines to reduce risks and limit banks’ Net Open Position (NOP) to 20% short or 0% long of shareholders’ funds. Banks exceeding these limits must adjust their positions by the deadline. The CBN also directed banks to maintain sufficient high-quality liquid foreign assets, adopt treasury and risk management systems, and ensure accurate reporting. Non-compliance with the guidelines will result in sanctions and suspension from the foreign exchange market. It comes amidst review that has aligned the Nigeria Foreign Exchange Market (NFEM) rates with that on the streets. The new circular is expected to force banks to sell off excess dollar liquidity exceeding US $5bn.
