CBN Imposes $10 Million Limit on Daily Foreign Currency Deposits

In a bid to stabilize the foreign exchange market and ensure efficient management of excess foreign currency, the Central Bank of Nigeria (CBN) has introduced new guidelines for Deposit Money Banks (DMBs) regarding the deposit of foreign currency notes.

The directive, detailed in a circular issued by the Director of Currency Operations, Mohammed Solaja, was published on the CBN’s website on Friday.

Under the new regulations, each bank is permitted a maximum daily deposit of $10 million in USD 100 and USD 50 notes. These deposits can only be made at the CBN branches in Abuja and Lagos.

For smaller denominations, such as $20 notes and below, the maximum daily deposit is set at $1 million.

The circular, referenced as COD/DIR/INT/CIR/001/016, specifies that DMBs must notify the CBN in writing of their intention to make such deposits at least three working days in advance.

This measure aims to facilitate proper planning and efficient handling of foreign currency deposits.

“To deepen the foreign exchange market, boost liquidity, and attain convergence in the exchange rates of the parallel and official markets, the Central Bank of Nigeria (CBN) has approved that DMBs may deposit their excess foreign currency notes with Lagos and Abuja branches of the bank,” the circular stated.

“The approval is a response to the increasing demand by DMBs to deposit their forex cash with CBN for onward credit to their offshore accounts with correspondent banks.”

The CBN’s move comes amid growing concerns over the volatility of the naira and the need for more robust management of foreign currency reserves.

By capping daily deposits and requiring advance notification, the CBN aims to better monitor and control the inflow of foreign currency into the banking system.

Industry analysts have welcomed the new guidelines, noting that they could help reduce pressure on the naira and contribute to a more stable foreign exchange market.

However, some have also expressed concerns about the potential impact on banks’ operational efficiency, especially for those handling large volumes of foreign currency transactions.

The new rules are part of broader efforts by the CBN to enhance liquidity and achieve exchange rate stability.

The central bank has been implementing various measures to address the challenges in the foreign exchange market, including interventions in the forex market and policy adjustments to attract foreign investment.