The Central Bank of Nigeria (CBN) has issued additional guidelines to Deposit Money Banks (DMBs) regarding operational changes in the foreign exchange market, which were announced on June 14, 2023.
The CBN has emphasized the following key points in its guidance:
- All visible and invisible transactions, including medical expenses, school fees, BTA/PTA, airline remittances, and others, are eligible for the Investors’ and Exporters’ (I&E) window.
- DMBs are required to process eligible invisible transactions promptly on behalf of their customers using the applicable rate at the I&E window.
- Ordinary Domiciliary Account Holders will have unrestricted access to funds in their accounts.
- Domiciliary account holders are allowed to withdraw or transfer cash deposits up to USD$10,000 per day, or the equivalent, via telegraphic transfer.
- DMBs must submit reports to the CBN, including the purpose of such transactions.
- Cash deposits into domiciliary accounts will not be limited, provided DMBs comply with proper Know Your Customer (KYC) procedures, exercise due diligence, and adhere to prevailing Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT) laws, as well as other relevant regulations.
- The CBN will prioritize the orderly settlement of committed FX forward transactions to enhance market confidence.
- The Bank will streamline its Cash Reserve Ratio (CRR) maintenance processes and ensure equitable implementation across the banking industry.
- The CBN assures the public that it remains committed to maintaining a stable and efficient FX market that serves the needs of all legitimate users.
Implications:
Regarding cash deposits:
Previously, there were restrictions on the amount of cash Nigerians could withdraw from their domiciliary accounts, causing uncertainty among account holders. Withdrawals of previously deposited cash were limited to $10,000 per week or even per month, depending on the prevailing Central Bank Policy.
However, this has now changed, as individuals can withdraw or transfer up to $10,000 per day from their domiciliary accounts. It is important to note that transfers from “inflow,” such as wired transfers into a deposit account, have no limits.
The CBN also clarifies that Nigerians can deposit unlimited amounts of cash into their domiciliary accounts.
Observations:
This new directive will be well-received by Nigerians who have faced difficulties accessing their cash deposits in domiciliary accounts due to the restrictions imposed by the central bank.
Previously, accessing cash deposits in domiciliary accounts was severely limited, as the CBN, under Emefiele’s leadership, aimed to prevent the dollarization of the economy.
With this recent development, Nigerians with domiciliary accounts can now use their debit cards abroad without concerns about restrictions.
Moreover, this change is likely to enhance liquidity in the forex market, as it allows more individuals to deposit their foreign currency in banks.
