THE CABLE
The Central Bank of Nigeria (CBN) has asked deposit money banks (DMBs) to stop utilising gains from the revaluation of the naira to pay dividends or finance operations.
CBN said a review of the foreign exchange (FX) regime change showed the banks are in a position to profit from the policy because of its potential to significantly increase the naira value of banks’ foreign currency (FCY) assets and liabilities.
The apex bank gave the directive in a letter, titled: ‘Impact of Recent FX Policy Reforms: Prudential Guidance to the Banking Sector’, which was dated September 11, 2023, and signed by Haruna Mustafa, CBN’s director of the banking supervision department.
A revaluation of a currency occurs when the value of a currency is increased relative to another currency in a fixed exchange rate regime.
On June 14, the CBN officially unified the multiple FX rate systems, collapsing all FX windows into the investors’ and exporters’ (I&E) window.
The policy resulted in the depreciation of the local currency by about 63 percent, causing significant levels of volatility in the FX market.
In the letter, the financial regulator said the transition from the multiple exchange rates regime to a single rate could result in varying levels of FX revaluation gains.
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