The Central Bank of Nigeria (CBN) has granted approval to commercial and merchant banks to trade foreign currency in dormant accounts, a move that could drive investment opportunities and enhance Nigeria’s financial market.
The CBN revealed this plan in newly released guidelines, part of the Foreign Currency Disclosure, Deposit, Repatriation, and Investment Scheme, which begins on November 6, 2024.
Under this scheme, banks are permitted to utilize foreign currency deposits that have not yet been invested by account holders.
These funds, which come from designated “dormant” foreign exchange accounts, are now allowed to be traded by the banks.
The CBN emphasized that these deposits would still be accessible to participants on request, ensuring that account holders have full control over their funds.
In a statement, the CBN said, “CMNIBs may trade with any deposited ITFC not immediately invested by a participant, provided that the funds would be made available to the participant when needed.”
The apex bank clarified that interest payments on these uninvested funds would follow the standard bank charges and fees set out in Nigeria’s banking guidelines.
To keep the scheme transparent, the CBN has required banks involved to submit monthly reports on their use of these foreign currency funds.
The CBN stressed that these reports must be submitted by the 14th of each month.
Each report should detail how many participants are in the scheme, the total value of Investment Funds Transfer Certificates (ITFC) received, and the number of uninvested funds.
In addition to participant data, banks must provide detailed updates on investments made, applications processed, and any challenges faced.
This ensures the CBN has a clear understanding of each bank’s activities under the scheme and can address any potential issues early.
The CBN also stated that it could request further information at any time if it feels additional details are necessary for effective oversight.
This measure, it says, is to make certain that all transactions are above board.
The CBN’s foreign currency scheme follows the recent launch of a new “Disclosure Scheme” by the Federal Government.
The Disclosure Scheme, under Executive Order No. 15 of 2023, aims to encourage Nigerians, both at home and abroad, to declare and deposit their foreign currency holdings in local banks.
By creating a legal pathway for Nigerians to bring overseas assets into Nigeria’s financial system, the government hopes to boost national reserves, stimulate investments, and support the broader economy.
To make the scheme attractive, the government is offering various incentives.
These include tax immunity, confidentiality, asset protection, interest on deposits, and flexible repatriation options.
The incentives are designed to assure Nigerians that they can safely bring their foreign currency into the country without risking penalties or loss of privacy.
According to financial analysts, these incentives could play a significant role in helping Nigeria’s economic recovery, as more assets are brought into the formal financial system.
As part of the guidelines, the CBN is requiring banks to maintain full accountability for any foreign currency that remains uninvested.
Banks will need to provide a statement of uninvested ITFCs and track all trades, investments, and loans funded from these accounts.
The CBN’s oversight is expected to create a system that ensures funds are used responsibly while still protecting the original account holders.
The CBN’s statement also emphasized that the foreign currency from these dormant accounts can be used only in approved sectors.
This step, it says, is to ensure that these investments benefit the Nigerian economy and contribute to critical industries that need support.