The Central Bank of Nigeria (CBN) on Thursday increased the net foreign position of deposit money banks and other authorised dealers in the forex market from 0.1 per cent of shareholders’ funds unimpaired by losses, to 0.5 per cent of the shareholders’ funds.
The CBN stated this a circular titled: “Utilisation of RDAS and interbank funds/review of the foreign exchange trading positions of banks,” posted on its website.
Banks used to have a one per cent net open position to deal on the naira before the currency was devalued. But the central bank cancelled it to zero in December. Last week it raised the net foreign position to 0.1 per cent net position but had warned them against carry trades or speculative activity.
Olakanmi Gbadamosi, director, Trade and Exchange Department, CBN, who signed the latest circular also noted that as part of the CBN’s continuation of the review of developments in the forex market as well as to curb speculative demand in the market, both Retail Dutch Auction System (RDAS) and interbank funds should henceforth be used strictly for the funding of Letters of Credits, Bills for Collections and other invisible transactions, subject to appropriate documentation.
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“Consequently, RDAS and interbank funds should no longer be sold to BDCs and other authorised buyers. Meanwhile, the weekly sales of forex to BDCs will be sustained by the CBN based on the liquidity needs of the market,” he said.
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