The Central Bank of Nigeria (CBN) has given commercial, merchant and non-interest banks (CMNIBs) approval to trade with dormant foreign currencies deposited in domiciliary accounts in their portfolios.

The authorisation rides on the implementation of the Foreign Currency Disclosure, Deposit, Repatriation and Investment Scheme issued earlier.
But an expert said the apex bank erred in the assumption that the authorisation would increase liquidity, as that was merely what every bank had been doing.

Hitherto, banks, in their financial intermediation, use all proceeds of domiciliary accounts, just like naira accounts, in meeting their daily obligations and only scramble for the funds when depositors request.

Hence, an expert in monetary policy, Prof Godwin Owoh, said, “The policy does not make any material difference in balances of foreign exchange (FX) or liquidity position.”
According to the CBN, the new policy took effect on November 6 as part of the Foreign Currency Disclosure, Deposit, Repatriation and Investment Scheme.

The apex bank explained that the foreign currency deposits being invested by the banks should be made available upon request by participants.
Also, banks are required to provide monthly returns from the scheme, no later than the 14th day of the following month.

“CMNIBs may trade with any deposited Internationally Tradable Foreign Currencies (ITFC) not immediately invested by a participant, provided that the funds would be made available to the participant when needed. Interest payment by CMNIBs on the balance in the designated domiciliary account shall be in line with relevant provisions of the guide to charges by Banks and Other Financial Institutions in Nigeria,” the bank said.

Reiterating the need for transparency in the process, the CBN urged the banks to submit detailed reports to ensure effective oversight.

The reports must include the total number of participants enrolled in the scheme and the total value of Investment Funds Transfer Certificates (IFTC) received during the reporting period and cumulatively for the financial year. Additionally, banks are required to provide an update on applications received and processed, including any notable trends or challenges encountered during the review process, and also disclose all financial transactions conducted under the Scheme, specifying the investments made in permissible instruments and sectors,” it added.