The apex bank gave the directive in a new circular released on Wednesday, titled, “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks”.
The CBN, in the circular, dated January 31, 2024, was signed by the Director, Trade and Exchange, CBN, Dr. Hassan Mahmud, and representative of the Director, Banking Supervision, CBN, Mrs. Rita Sike, also warned lenders against hoarding excess foreign currencies for profit.
“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 circular read.
The apex bank also issued prudential requirements that banks must follow. A key focus of these requirements is the management of the Net Open Position (NOP) which measures the difference between a bank’s foreign currency assets (what it owns in foreign currencies) and its foreign currency liabilities (what it owes in foreign currencies).
It mandates that the NOP must not exceed 20 per cent short or 0 per cent long of the bank’s shareholders’ funds.
According to the apex regulator, this calculation must be done using the Gross Aggregate Method, which provides a comprehensive view of the bank’s foreign currency exposure.
The CBN also stated that banks with current NOPs exceeding these limits are required to adjust their positions to comply with the new regulations by February 1, 2024.
Furthermore, it said that banks must calculate their daily and monthly NOP and Foreign Currency Trading Position (FCT) using specific templates provided by the CBN.
The apex bank had on Monday, warned banks and FX dealers against reporting false exchange rates, among others.