NewStats: 3,261,417 , 8,173,926 topics. Date: Thursday, 29 May 2025 at 07:59 AM 5i254c

The Central Bank of Nigeria (CBN) on Wednesday said the Net Open Position (NOP) limit of banks’ overall foreign currency assets and liabilities both on and off-balance sheet should not exceed 20 percent short or 0 percent long of shareholders’ funds unimpaired by losses using the gross aggregate method.

This was disclosed in a circular to all banks, titled ‘Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks’ tly signed by Hassan Mahmud, director trade and exchange department of the CBN and Rita Ijeoma Sike, for director, banking supervision department.

The circular mandates that banks must adhere to a NOP limit, ensuring it does not sur 20 percent short (holding more foreign currency assets than liabilities) or 0% long (not holding more foreign currency assets than the bank’s shareholder funds unimpaired by losses).

It said banks currently exceeding these prescribed NOP limits are obligated to make adjustments to their positions to align with the new regulations by February 1, 2024.

This move is aimed at mitigating risks associated with excessive foreign currency exposure and fostering a more resilient banking sector.

NOP refers to the difference between a bank’s foreign currency assets and liabilities. This includes both on-balance sheet and off-balance sheet items.

Regulatory bodies often impose NOP limits on banks to prevent excessive exposure to foreign currency fluctuations and potential financial instability.

These measures aim to enhance risk management within the banking sector, fostering stability and safeguarding against potential vulnerabilities associated with excessive foreign currency exposure.

In addition to the NOP limits, banks are required to diligently calculate their daily and monthly NOP, along with their Foreign Currency Trading Position (FCT), using specific templates provided by the Central Bank. This meticulous approach aims to enhance transparency in reporting and ensure that banks adhere to the regulatory framework.

These measures underscore the Central Bank’s commitment to fortifying the financial system against potential vulnerabilities, promoting responsible risk management practices within the banking sector.

Banks are urged to promptly adhere to these directives to maintain regulatory compliance and uphold the integrity of the financial system.

According to the circular, banks are also required to have adequate stock of high-quality liquid foreign assets, i.e. cash and government securities in each significant currency to cover their maturing foreign currency obligations. In addition, banks should have in place a foreign exchange contingency funding arrangement with other financial institutions.

The CBN emphasized the importance of strategic financial practices for banks to mitigate foreign currency risks effectively. The key recommendations include borrowing and lending in the same currency, known as natural hedging, to avoid potential mismatches associated with foreign currency exposure.

The circular underscored that the interest rate basis for borrowing should align with that of lending, stressing the importance of eliminating discrepancies in floating and fixed interest rates. This approach aims to mitigate basis risk linked to foreign borrowing interest rate fluctuations, fostering stability in financial operations.

The circular highlighted specific guidelines regarding Eurobonds. It stated that any clause related to early redemption should be initiated by the issuer, and approval must be sought from the CBN. This holds true even if the bond does not qualify as tier 2 capital. The CBN emphasizes the need for timely reporting in this regard.

Source: https://businessday.ng/news/article/cbn-imposes-limit-on-banks-foreign-currency-exposure/

I just hope this is not another " trial and error"

Please can someone tell me any new thing the government is doing differently from previous government?..

Just one?.

Any improvement anywhere please?.

What this central bank Governor is doing is crashing the currency. He had better stop this Naira floating policy and be more realistic.

:D9

Grammar, can someone please explain.

Government of criminals

Can any good news come out of APC government? only God knows.



Tinubu, a bad man with good intentions

Floating naira was a terrible decision at this point in time.

In a sane clime everyone will be on the street demanding a reversal.

But in Nigeria everyone will be playing with fire

If am right, what this means is that CBN is trying to ensure banks do not "buy" or "hold* too much foreign currency in their books.

Since our naira is crashing steadily, some banks might decide to buy or hold plenty foreign currency with the hope to profit from it after a period of time. So CBN is trying to ensure that banks don't expose their self so much to FX.

MrSundry:


Source: https://businessday.ng/news/article/cbn-imposes-limit-on-banks-foreign-currency-exposure/

Nice one. This is sequel to the info and s shared in this thread that made frontage just few days ago , among other strategic monitoring of patterns seen in the banks fx operations https://nairaland.unblockandhide.com/7974447/90-2023-diaspora-remittances-didnt

It's just not adding up for banks to borrow overseas in dollars then lend in naira here in Nigeria then go back to use the naira to buy dollars and now export the fx overseas to pay debt.
God bless Nigeria for ever! Check my signature for free stuffs!

it's my turn,it's my turn under 8month dollar is now 1500 from 750 where the other generation curse left it.i said leave all this generation old men make them rest una no gree.you go just allow ancestors they run 21st century program.but on a serious note dollar should hit 2000 before June Biko any plan against it hitting 2000 by June fire

All these policies yet no single plan rolled out to position the country in increasing non-oil export earnings and reducing import....

All these policy shouldn't be prioritised over how to increase earnings. It's simply shying away from the real work and trying to do what appears simpler and isn't sustainable in the long run

FreeStuffsNG:
Nice one. This is sequel to the info and s shared in this thread that made frontage just few days ago , among other strategic monitoring of patterns seen in the banks fx operations https://nairaland.unblockandhide.com/7974447/90-2023-diaspora-remittances-didnt

It's just not adding up for banks to borrow overseas in dollars then lend in naira here in Nigeria then go back to use the naira to buy dollars and now export the fx overseas to pay debt.
God bless Nigeria for ever! Check my signature for free stuffs!

Oga keep quiet. Where is the imaginary 8 trillion naira that you told us will help strengthen our currency 2 weeks ago. Between you and devil I nor know who lie

In English please.....

Nonsense journalism from business day.. what does the whole thing mean.. how does business day think this would affect our current economic situation?

Journalism is just dying and free falling like the naira

All these fire brigade approach can never save the Naira from discovering crude oil in Katsina State

Smithkafors:
Please can someone tell me any new thing the government is doing differently from previous government?..

Just one?.

Any improvement anywhere please?.

Can you tell us what your state governor and local government chairman are doing differently than their predecessors. At least that counts too.

Productivity is the only solution. Only Peter Obi understands these things. It is not by making mouth. Nothing will change until quality of life improves

MrSundry:
I just hope this is not another " trial and error"

There will always be an hypothesis before a theory and a peer reviewed theory and an acceptable knowledge for solution.
Unfortunately our Universities are not providing this, hence live happening will be the research for what will work

Gazelle Garagaga Economics of Tinubu
The Great Tinubulation..
Nigerians should prepare for more suffering under Tinubu regime for the next 8 years.

ebenholer2:

Can you tell us what your state governor and local government chairman are doing differently than their predecessors. At least that counts too.

You should be the one to tell us where the Renewed Hope is

Smithkafors:
Please can someone tell me any new thing the government is doing differently from previous government?..

Just one?.

Any improvement anywhere please?.

Them wan use style make banks vomit too much dollars wey dey their vaults to naija economy.

skj1377:
What this central bank Governor is doing is crashing the currency. He had better stop this Naira floating policy and be more realistic.

Don't mind them, they are playing games. They think we don't know. Stop the naira floating policy, and it won't go on a free fall. they refused.

There no more abokifx to accuse again.

All na trial and error... Nothing meaningful might come out of it.

Block all online sending foreign currency app

Fruity usual

Smile

bad addiction is a distraction to your direction in life.. let me help you out via my signature

Smithkafors:
Please can someone tell me any new thing the government is doing differently from previous government?..

Just one?.

Any improvement anywhere please?.

A lot,this government is handicapped ,all these are efforts to make the naira strong

But,it won't work,the country's Major exports crude oil has been sold in advance and the money looted and wasted on itrelevances

So,all these policies are just trial and error