CBN Grants Banks Permission to Trade with Deposited Foreign Currencies

The Central Bank of Nigeria (CBN) has authorized banks to trade with foreign currencies deposited under the amnesty initiative for the foreign exchange (FX) deposit window.

This directive was outlined in a document dated November 5, 2024, signed by John Sonojah, acting director of the financial policy and regulation department, and Adetona Adedeji, acting director of the banking supervision department.

The initiative, known as the 'Disclosure Scheme,' was launched by the federal government on October 31, 2024, and is set to last for nine months. It aims to enhance transparency in the financial sector and bolster Nigeria's economic resilience, growth, and development.

According to the guidelines, commercial, merchant, and non-interest banks are permitted to trade with any deposited Internationally Tradable Foreign Currencies (ITFC) not immediately invested by participants. However, these funds must be made available to the participants when needed.

The guidelines also stipulate that interest payments on balances in designated domiciliary accounts should align with the relevant provisions of the Guide to Charges by Banks and Other Financial Institutions in Nigeria.

The scheme allows individuals to deposit dollar bills held outside the formal banking system without facing penalties, taxes, or scrutiny. The Minister of Finance and Coordinating Minister of the Economy, Wale Edun, emphasized this during a briefing after the 144th meeting of the National Economic Council, chaired by Vice President Kashim Shettima.

Banks are required to conduct customer due diligence, including identifying the beneficial owner of the funds and ensuring compliance with anti-money laundering laws. The CBN has also mandated that banks track and report participants' ITFC investments in permissible instruments or sectors and maintain confidentiality of all information received from participants.

Experts have expressed support for the initiative, noting that it could boost liquidity in the foreign exchange market and reduce pressure on the exchange rate. However, concerns remain about the trust deficit between the government and citizens, which may affect the scheme's success.