Ahead of the midnight February 1, 2024 deadline given by the Central Bank of Nigeria to commercial banks to sell all excess foreign exchange holdings, Deposit Money Banks on Thursday made frantic efforts to offload their surplus dollar stocks.

It was learnt that the treasury departments of the DMBs spent the entire day battling to sell their excess FX holdings. Officials processed several foreign exchange request forms of their customers as they sold more dollars to them, The PUNCH gathered.

The increase in the level of forex sale activities at the official foreign exchange market, it was learnt, led to the rebound of the naira at the parallel market on Thursday.

Several top bank executives, who spoke to The PUNCH on condition of anonymity because they were not authorised to speak on the matter, confirmed there were huge forex transactions in the banks.

As of 6pm on Thursday, bank officials especially those of the treasury departments, were making efforts to meet the new prudential requirements of the regulator.

Amid its fresh moves to stabilise the nation’s volatile exchange rate, the CBN had in a circular released on Wednesday, ordered DMBs to sell their excess dollar stocks latest February 1, 2024. The CBN also warned lenders against hoarding excess foreign currencies for profit.

According to officials, the central bank believes some commercial banks hold long-term foreign exchange positions to enable them to profit from the volatile movements of exchange rates.

The new circular introduced a set of guidelines aimed at reducing the risks associated with these practices.

In the circular titled, “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks”, the CBN raised concerns over the growing trend of banks holding large foreign currency positions.

The circular read in parts, “The Central Bank of Nigeria has noted with concern the growth in foreign currency exposures of banks through their Net Open Position (NOP). This has created an incentive for banks to hold excess long foreign currency positions, which exposes banks to foreign exchange and other risks.”

The apex bank further directed banks with current NOPs exceeding its limits to adjust their positions and comply with the new regulations by February 1, 2024.

The latest circular came barely 48 hours after the CBN released a circular, warning banks and FX dealers against reporting false exchange rates, among others.

The new development came on the heels of the adjustment of the methodology used for the calculation of the nation’s official exchange rate by the FMDQ Exchange, a situation that has moved the official exchange to about N1,500 from around N900/dollar.

Following the latest CBN directive which is aimed at unifying the official and parallel market rates of the local unit, several banks sold forex to their customers on Thursday.

The development led to a sharp rebound of the national currency in the official market. Bureau De Change operators in Lagos, Kano, and Abuja also pushed to sell their dollar holding amid fear the local unit might sustain the gain in coming days.

Alhaji Lawan Ismael, a BDC operator in Ikeja, Lagos, said he bought and sold the greenback for N1400/dollar and N1420/dollar, respectively.

Another BDC at the Lagos airport, Sabiu Abdullahi, said the greenback went for between N1400/$ and N1400/$. This, he said, was a huge rebound from over N1500/$ it sold on Wednesday.

In Abuja, the naira traded at the parallel market between N1,300/$ and N1,350/$.

A Bureau De Change operator, Ibrahim Yahu told The PUNCH, “Today, because of our small action, you could not get a standard price. Those who bought today did so at risk. But the dollar sold between N1,300 and N1,350.”

The naira closed at N1,455.59/$ at the official window on Wednesday, according to the FMDQ Securities Exchange. This rate has been yet to be updated as of 09:39 pm Thursday.

Commenting on the effect of the circular, bank officials who pleaded anonymity said they were bound to ensure their books remain within the new FX prudential limit.

“All banks working to meet the deadline,” the chief financial officer of a tier-2 bank told The PUNCH on Thursday evening.

Also, a top official of a tier-1 bank, while commenting on the development, said, “After the CBN directive, we had to push out the FX.”

Another official said, “All banks are pushing out funds now, and we are ready to sell. The key thing is profit here.”

Meanwhile, some bank officials said beyond the FX in banks, the CBN and the security agencies would need to beam their searchlights on politicians and government officials who are hoarding dollars in their homes.

As part of its effort to boost liquidity in the FX market, the CBN on Wednesday issued a new circular that removes the previous cap on exchange rates quoted by International Money Transfer Operators.

In a document titled, ‘Guidelines on International Money Transfer Service in Nigeria,’ the CBN asked IMTOs to make payments to customers only in Nigerian currency while using the prevailing exchange rate on the day the transfer is received.

Abuja BDCs shutdown

On Wednesday, a source told The PUNCH that BDC operators would close their shop on Thursday. The Chairman of Bureau De Change operators in the FCT, Abdulahi Dauran, confirmed this to local media.

Dauran noted that the operators were shutting down their operation because of the unavailability of dollars.

According to him, that has been an uptick in online business transactions and cryptocurrency, which has been affecting their business.

Speaking on Thursday, the same source who spoke to The PUNCH on Wednesday, revealed that operators were set to close the market next week on Monday due to the success recorded on Thursday.

The source said, “There is another plan in motion to close the market next week Monday. It is going to be another crackdown so that the price of dollar will reduce to the barest minimum.”

Meanwhile, an official at a first-generation bank told one of our correspondents that the banks did not have enough physical foreign notes to dispose of as directed by the CBN.

The source who is not permitted to speak to the media claimed that the surge observed by the apex bank in its Net Open Positions were electronic notes and not physical as insinuated by the circular.

StarRida:
The only lasting solution is to sack the current CBN governor he gat nothing to offer

Olachase:
and make ur papa day InCharge abi no be so

StarRida:
The only lasting solution is to sack the current CBN governor he gat nothing to offer

ironheart:
The BDC are shutting down to drive up the value of dollars, but if the CBN sustain this current drive, i bet you that the BDC guys will get burnt

dettolgel:
We need a lasting solution not a temporary one. Once they offload the dollars what next?

Faiththatworks:
I have been asking this question since last week,and I really need some Intelligent Nigerians to please educate me.
What's causing the downward spiral of the Naira to the Dollar, Can the CBN and the Banks please release the industries where the dollar demand is coming from.
I can say for a fact that NNPCL already told us petrol is no longer subsided,all diesel and Aviation fuel importers have given them selves some sense and have totally reduced their importation because of the Dangote Refinery.
Even Manufactures have reduced importation of essential raw materials,from Drugs to household essentials,everyone is cutting back on importation cos of the high Usd,so what's causing the spike in Demand.
My economic theory is very simple and I hope I get some Intelligent rebuttals,anyone buying Usd this high at 1$ to 1400,will never make a profit on whatever they import.
No right thinking importer will do business at such a ridiculous rate and still expect to make a profit,so who's buying this Usd.
I daresay this spiral is just open ended round tripping,the banks and the bureau are really the ones buying and selling this Usd,they create an artificial supply and demand bogus economy just to milk the Nigerian economy.
EFCC,NSA,ICPC should categorize these people as Economic Terriorist and treat them as such.
God bless Nigeria.

Faiththatworks:
I have been asking this question since last week,and I really need some Intelligent Nigerians to please educate me.
What's causing the downward spiral of the Naira to the Dollar, Can the CBN and the Banks please release the industries where the dollar demand is coming from.
I can say for a fact that NNPCL already told us petrol is no longer subsided,all diesel and Aviation fuel importers have given them selves some sense and have totally reduced their importation because of the Dangote Refinery.
Even Manufactures have reduced importation of essential raw materials,from Drugs to household essentials,everyone is cutting back on importation cos of the high Usd,so what's causing the spike in Demand.
My economic theory is very simple and I hope I get some Intelligent rebuttals,anyone buying Usd this high at 1$ to 1400,will never make a profit on whatever they import.
No right thinking importer will do business at such a ridiculous rate and still expect to make a profit,so who's buying this Usd.
I daresay this spiral is just open ended round tripping,the banks and the bureau are really the ones buying and selling this Usd,they create an artificial supply and demand bogus economy just to milk the Nigerian economy.
EFCC,NSA,ICPC should categorize these people as Economic Terriorist and treat them as such.
God bless Nigeria.

PressMyButton:

In a saner clime, there should be no black market for FX. How do they get dollars that are scarce or difficult to get in the banks?

Paraman:
One kid was telling me dollar will shoot up to $/#2000 yesterday because abokis decide not to sell or buy yesterday in some part of abuja.