Apex bank deploys monitors in commercial banks to ensure compliance with existing rulesYesterday, the Central Bank of Nigeria (CBN) addressed a pressing issue. It accused commercial banks of hoarding over $5 billion in foreign currencies, surpassing the approved threshold set by the apex bank.
The CBN attributed the current scarcity of foreign exchange and the decline of the naira against the dollar to the actions of the Deposit Money Banks (DMBs).
This accusation followed the CBN’s expressed concern about banks’ excessive exposure to foreign exchange the day before.
At the end of trading yesterday, the naira was exchanged at N1,450/$ in the parallel market. This marked a significant gain of N70 against the dollar compared to Wednesday’s closing rate of N1,520/$.
As a result, the CBN has instructed these banks to release any excess foreign currency they possess to individuals and businesses in need of foreign exchange by today’s deadline.
Failure to comply with this directive will result in sanctions in accordance with existing rules and regulations.To ensure compliance with the directive, teams of examiners have been dispatched to all commercial banks heavily involved in foreign exchange transactions.
The CBN has taken action to address the severe scarcity of foreign currency. Releasing the surplus foreign currency is expected to increase market liquidity and alleviate the pressure on the value of the naira.
The initial response from the market to the CBN’s directive has been mixed. Some banks have promptly adhered to the directive and met the deadline for releasing the excess dollars.
This approach is seen as a positive step towards easing the strain on the naira and promoting a more favorable exchange rate.However, some financial institutions are cautious about disclosing their exact dollar reserves and are proceeding with caution before fully complying with the directive.
