Under a new guidelines, the CBN has ordered banks to sell excess dollars within 24 hours of receiving them. This move is part of the CBN’s efforts to crack down on banks that engage in forex speculation and to mitigate the risks associated with large foreign currency positions.
The CBN expressed concerns over the growing trend of banks holding substantial amounts of foreign currency, which creates an incentive for them to take on excessive long foreign currency positions. This exposes banks to foreign exchange and other risks, which could lead to significant losses and pose systemic challenges to the banking sector.
To manage these risks and prevent potential losses, the CBN has issued prudential requirements that banks must adhere to. These requirements aim to ensure that banks report their foreign currency exposure accurately and take necessary measures to prevent excessive speculation.
The circular, signed by the CBN’s director of trade and exchange department, Hassan Mahmud, and his banking supervision colleague, Rita Ijeoma Sike, emphasizes the importance of risk management and urges banks to comply with the new guidelines promptly.
This crackdown on banks by the CBN is part of broader efforts to stabilize the foreign exchange market and ensure the efficient allocation of foreign currency resources. By curbing excessive speculation and risk-taking, the CBN aims to maintain stability in the banking sector and safeguard the overall economy.
Overall, the CBN’s move to order banks to sell excess dollars in 24 hours is a significant step towards curbing forex speculation and mitigating risks. It demonstrates the CBN’s commitment to maintaining a stable and well-regulated banking sector, ultimately benefiting the Nigerian economy as a whole.
