CBN issues guidelines for Nigeria’s foreign exchange deposit scheme to boost liquidity, regulate forex deposits, and encourage transparency.
The Central Bank of Nigeria (CBN) has released guidelines for commercial, merchant, and non-interest banks to implement the government’s new foreign exchange deposit window, a nine-month initiative that aims to improve liquidity in the country’s foreign exchange market.
The guidelines, effective from 6 November 2024, outline protocols for banks to accept, trade, and safeguard dollar deposits, offering participants a penalty-free opportunity to bring foreign currency into the formal banking system.
Also read: CBN clarifies: No deadline for use of old Naira notes, all remain legal tender
The guidelines, announced by CBN officials John Onojah, acting Director of the Financial Policy and Regulation Department, and Dr Adetona Adedeji, acting Director of the Banking Supervision Department, are part of the Federal Government’s broader strategy to address foreign exchange scarcity.
The CBN’s document, Guidelines on Implementation of the Foreign Currency Disclosure, Deposit, Repatriation, and Investment Scheme, 2024, specifies how banks can utilise deposits of Internationally Tradable Foreign Currencies (ITFCs). Banks are permitted to trade uninvested ITFCs, provided that the funds remain accessible to participants when
itionally, interest on deposits will follow the existing Guide to Charges by Banks and Other Financial Institutions in Nigeria.
CBN has mandated that banks maintain stringent anti-money laundering and counter-terrorism checks for participants in the scheme, ensuring funds are handled within regulatory frameworks.
Key requirements include the submission of participants’ Bank Verification Numbers (BVNs), National Identification Numbers, or Tax Identification Numbers, alongside account details and deposit amounts.
Economic analysts are optimistic about the scheme’s potential. Capital market expert Rotimi Fakayejo supports the move, noting that it should help curb informal dollar-denominated transactions within Nigeria, which can destabilise exchange rates.
Fakayejo suggests that the government could consider offering bonds specifically targeted at Nigerians in the diaspora to further reduce pressure on local forex demand.
The scheme, analysts at Meristem added, presents an opportunity to integrate previously informal currency holdings into the formal economy, potentially benefitting the real sector and bolstering FX supply.
However, economist and business strategist Marcel Okeke expressed caution, citing concerns about citizens’ trust in the government. Okeke acknowledged the scheme’s benefits but pointed out that recent policy changes have weakened confidence among Nigerians.
He suggested the government intensify its anti-money laundering measures to mitigate risks that the initiative might inadvertently facilitate illicit activity.
The Afrinvest Monthly Market Report showed an ongoing decline in the naira’s value, which fell by 8% in October at the official FMDQ Exchange to N1,675.50 per dollar.
The currency similarly depreciated at the parallel market by 2.7% to N1,726.00 per dollar, underscoring persistent volatility in the forex market despite higher turnover at the NAFEM window, which increased by 46.6% to $166.6 billion in October.
As the scheme rolls out, the CBN hopes that it will attract significant forex inflows, stabilise the naira, and support inflation control, creating a more resilient economy.
Whether the scheme will restore enough trust to prompt Nigerians to deposit their forex holdings in local banks remains to be seen.
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