Four banks holding $5bn – Reps

The House of Representatives has mandated its committees on Banking Regulations and Banking Institutions to investigate non-compliance by banks and financial institutions with Central Bank of Nigeria (CBN) directives on the Net Open Position (NOP) limits.

The decision followed the adoption of a motion on matters of urgent national importance by Rep. Babajimi Benson (APC, Lagos) at the plenary on Wednesday.

Daily Trust reports that the CBN had, as part of measures to address the rising foreign exchange, directed banks to sell excess dollars in their NOP.

NOP is the net outstanding forex balance of all assets, liabilities and off-balance sheet items of commercial banks.

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Presenting the motion, Benson stated that there has been a steady rise in the rate of the dollar in comparison to the naira, adding that it rose to N1,520 to the dollar in the last week.

He said the astronomical rise was due to the diverse market forces and certain economic policies adopted by the government, including the liberalisation of the dollar.

The lawmaker however expressed concern that commercial banks and certain financial institutions in Nigeria usually hold back a large part of forex they obtain either through purchase, borrowing or allocation from the CBN rather than lending to their customers with a view to selling it when the exchange rate is high.

He said records have shown that four commercial banks have a cumulative excess holding of over five billion dollars as of January 2024. 

He however said one commercial bank has been identified to be fully compliant as it always makes all forex in its reserve available to clients.

Rep. Benson said, “This speculative activity by commercial banks and certain financial institutions has further exacerbated the harsh economic situation in the country and led to difficulty by legitimate businesses to obtain forex for their business transactions.

“The CBN has intervened by introducing new monetary policies to check the rise in the rate of dollar among which are the Net Open Position limits and holding excess long foreign exchange.

“Commercial banks and certain financial institutions are reluctant to implement the monetary measures put in place by the apex bank to check these unwholesome practices by banks and other financial institutions in the country.”