Nigerian lawmakers to probe alleged FX hoarding by banks
The House of Representatives has resolved to investigate the alleged hoarding of dollars by some commercial banks.
This resolution was a sequel to a motion moved by Babajimi Benson (APC, Lagos) on Wednesday during plenary.
Mr Benson, in his motion, said some banks are sabotaging the efforts of the Central Bank of Nigeria to halt the slide of the naira against major currencies. He stated that the banks have not been complying with the new FX risk management circular released by the CBN.
Last week, the CBN released a circular providing guidelines to manage FX risk.
The measures include restrictions on the overall foreign currency assets and liabilities and instructions for banks not to exceed 20 per cent short or 0 per cent long of shareholders’ funds unimpaired by losses using the Gross Aggregate Method.
The CBN said banks found to exceed these limits are mandated to rectify their positions by February 1.
Speaking on compliance with the guidelines, Mr Benson said most banks have not been complying with the directive. He said some banks are still engaging in speculative activities by hedging against the naira.
“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.
The legislator added that “speculative activity by commercial banks and certain financial institutions has further exacerbated the harsh economic situation in the country and led to the difficulty by legitimate businesses to obtain forex for their business transactions.”
Mr Benson, therefore, called for legislative intervention to support the efforts of the commercial banks.
Following the presentation of the motion, the House resolved to mandate the House Committees on Banking Regulations and Banking Institutions to conduct an investigative hearing on the non-compliance by banks and financial institutions with CBN directives on the Net Open Position Limits.
The resolution by the House is coming less than 24 hours after the Central Bank Governor, Oluyemi Cardoso, appeared before the lawmakers during a special session.
READ ALSO: Cardoso, CBN and the Nigerian economy, By Reuben Abati
The interaction between Mr Cardoso and the lawmakers centred around the volatility in the foreign exchange market. Many of the lawmakers raised concerns about the value of the naira and its effect on the cost of living.
Nigeria’s naira has been on a decline since the commencement of a unification policy as the currency is weighed down by illiquidity and speculative practices among market operators and street traders.
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The House of Representatives has resolved to investigate the alleged hoarding of dollars by some commercial banks.
This resolution was a sequel to a motion moved by Babajimi Benson (APC, Lagos) on Wednesday during plenary.
Mr Benson, in his motion, said some banks are sabotaging the efforts of the Central Bank of Nigeria to halt the slide of the naira against major currencies. He stated that the banks have not been complying with the new FX risk management circular released by the CBN.
Last week, the CBN released a circular providing guidelines to manage FX risk.
The measures include restrictions on the overall foreign currency assets and liabilities and instructions for banks not to exceed 20 per cent short or 0 per cent long of shareholders’ funds unimpaired by losses using the Gross Aggregate Method.
The CBN said banks found to exceed these limits are mandated to rectify their positions by February 1.
Speaking on compliance with the guidelines, Mr Benson said most banks have not been complying with the directive. He said some banks are still engaging in speculative activities by hedging against the naira.
“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.
The legislator added that “speculative activity by commercial banks and certain financial institutions has further exacerbated the harsh economic situation in the country and led to the difficulty by legitimate businesses to obtain forex for their business transactions.”
Mr Benson, therefore, called for legislative intervention to support the efforts of the commercial banks.
Following the presentation of the motion, the House resolved to mandate the House Committees on Banking Regulations and Banking Institutions to conduct an investigative hearing on the non-compliance by banks and financial institutions with CBN directives on the Net Open Position Limits.
The resolution by the House is coming less than 24 hours after the Central Bank Governor, Oluyemi Cardoso, appeared before the lawmakers during a special session.
READ ALSO: Cardoso, CBN and the Nigerian economy, By Reuben Abati
The interaction between Mr Cardoso and the lawmakers centred around the volatility in the foreign exchange market. Many of the lawmakers raised concerns about the value of the naira and its effect on the cost of living.
Nigeria’s naira has been on a decline since the commencement of a unification policy as the currency is weighed down by illiquidity and speculative practices among market operators and street traders.
Support PREMIUM TIMES’ journalism of integrity and credibility
Good journalism costs a lot of money. Yet only good journalism can ensure the possibility of a good society, an accountable democracy, and a transparent government.
For continued free access to the best investigative journalism in the country we ask you to consider making a modest support to this noble endeavour.
By contributing to PREMIUM TIMES, you are helping to sustain a journalism of relevance and ensuring it remains free and available to all.
Donate
TEXT AD: Call Willie – +2348098788999
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