Central Bank of Nigeria Denies Rumors of $30 Billion Domiciliary Deposit Conversion

In response to circulating reports suggesting a plan to convert $30 billion domiciliary deposits to naira, the Central Bank of Nigeria (CBN) categorically dismissed the rumors as “fake news” in a statement released on Saturday. The apex bank urged the public to disregard such speculations, emphasizing that there are no intentions to convert the mentioned foreign currency deposits.

This clarification comes in the wake of recent media speculations indicating that both the Federal Government and the central banks were contemplating the conversion of foreign currencies held in citizens’ domiciliary accounts to stabilize Nigeria’s currency. The nation’s currency had experienced its worst performance in history earlier in the week.

In a social media post, the CBN stated firmly, “No plans to convert $30 billion domiciliary deposits to naira. This news is fake!”

The apex bank’s swift reaction follows its directive to Deposit Money Banks (DMBs) issued two days prior, instructing them to sell excess dollar stocks by February 1, 2024. This move was part of the CBN’s strategy to stabilize the country’s volatile exchange rate.

A circular released on Wednesday, titled “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks,” expressed concerns over the increasing trend of banks holding substantial foreign currency positions. The CBN accused banks of maintaining excess foreign exchange positions and warned against hoarding for profit.

To address this, the central bank issued prudential requirements, with a specific focus on the management of the Net Open Position (NOP). The NOP measures the difference between a bank’s foreign currency assets and liabilities. The circular mandates that the NOP must not exceed 20 percent short or 0 percent long of the bank’s shareholders’ funds.

The CBN’s efforts to regulate foreign currency exposures and maintain stability in the financial system come amid a significant depreciation of the naira. On Monday, the official Nigerian Foreign Exchange Market witnessed the naira’s largest fall, depreciating by 24 percent to close at N1,348 per dollar.