Before the Central Bank of Nigeria’s midnight deadline on February 1, 2024, instructing commercial banks to divest their excess foreign exchange reserves, Deposit Money Banks (DMBs) engaged in intensive efforts on Thursday to sell their surplus dollar stocks.
Throughout the day, the treasury departments of DMBs were reportedly dedicated to offloading their excess FX holdings, processing numerous foreign exchange request forms and selling more dollars to customers, resulting in increased forex sale activities at the official market and a subsequent rebound of the naira at the parallel market.
Top bank executives, speaking anonymously, confirmed substantial forex transactions, while bank officials, particularly those in the treasury departments, worked until 6 pm to meet the new prudential requirements set by the regulator.
In an attempt to stabilize the exchange rate, the Central Bank of Nigeria (CBN) issued a circular on Wednesday, mandating DMBs to sell their excess dollar stocks by February 1, 2024, and warning against hoarding foreign currencies for profit.
The CBN expressed concerns about banks holding large foreign currency positions, introducing guidelines to mitigate associated risks.
The directive coincided with the adjustment of the official exchange rate methodology by the FMDQ Exchange, causing the official exchange rate to rise.
Responding to the CBN’s directive, several banks sold forex to customers on Thursday, leading to a significant rebound of the national currency in the official market.
Bureau De Change operators in various cities, including Lagos, Kano, and Abuja, also rushed to sell their dollar holdings amidst concerns that the local unit might sustain its gain.
The naira traded at different rates in parallel markets across cities.
Bank officials acknowledged the need to align with the new FX prudential limit, emphasizing their commitment to meet the deadline.
Additionally, some officials suggested the CBN and security agencies should scrutinize politicians and government officials hoarding dollars.
In a bid to boost FX market liquidity, the CBN issued a circular removing the previous cap on exchange rates quoted by International Money Transfer Operators.
As a response to the developments, BDC operators in Abuja closed shop due to the unavailability of dollars, and there were plans to shut down the market further next week, impacting the dollar’s price.
Despite the success recorded on Thursday, a source indicated that some banks claimed the surge in Net Open Positions was electronic rather than physical foreign notes, contrary to the circular’s implication.
