The Central Bank of Nigeria (CBN) has granted banks approval to manage idle foreign exchange (FX) deposits in domiciliary accounts. Learn more about the new directive and its implications for the banking sector.
The Central Bank of Nigeria (CBN) has permitted commercial, merchant, and non-interest banks in the country to trade with foreign currencies held in domiciliary accounts that were not promptly invested under the foreign currency disclosure, deposit, repatriation, and investment scheme.
According to the newly approved guidelines by the CBN, the scheme is scheduled to commence on November 6, 2024.
The Central Bank of Nigeria (CBN) stipulates that banks must provide access to foreign currency deposits upon request by participants. Additionally, the apex bank insisted that participating banks are obligated to submit their monthly reports by the 14th day of each subsequent month.
The CBN explained that CMNIBs are permitted to trade with any deposited ITFC not immediately invested by a participant, as long as the funds can be made available to the participant when required.
Interest on Uninvested Funds: CMNIBs will make interest payments on the balance in the designated domiciliary account according to the relevant guidelines outlined in the Guide to Charges by Banks and Other Financial Institutions in Nigeria.
RETURN SUBMISSION: Each CMNIB must submit monthly returns to the Bank regarding the operation of the Scheme, using a template specified by the Banking Supervision Department, no later than the 14th day of each subsequent month.
Guidelines for Reporting Under the Scheme
Furthermore, the CBN requires participating banks to submit comprehensive reports for transparency and oversight. These reports should detail the total number of participants enrolled in the scheme, the cumulative value of Investment Funds Transfer Certificates (ITFC) received both during the reporting period and for that year, along with updates on applications and processed transactions.
Banks are also obligated to reveal all financial transactions carried out under the scheme, detailing investments made in permitted instruments and sectors. Additionally, they must report any uninvested ITFCs, including their total value and related activities such as trades, investments, and loans financed by these unutilized ITFCs.
The CBN indicated that it might ask for more information to assist with monitoring and evaluation.
The recent regulations follow closely on the heels of the Federal Government’s launch of a nine-month period for participating in the Voluntary Currency Disclosure, Depositing, Repatriation, and Investment Scheme as outlined by Executive Order No. 15 of 2023. This initiative permits Nigerians to declare and deposit foreign currency into banks while offering benefits like tax immunity, asset protection, confidentiality assurance, interest earnings on deposits, and flexible options for repatriating funds.
