Reps to probe banks over non-compliance with CBN’s directive

The House of Representatives on Tuesday mandated its Committees on Banking Regulations and Banking Institutions to conduct an investigative hearing on the non-compliance by commercial banks and financial institutions with the Central Bank of Nigeria’s directives on the Net Open Position Limits.

NOP is the net outstanding balance of all assets, liabilities and off-balance sheet items in that currency.

The CBN had, in a circular, ED/FEM/PUB/FPC/001/001, dated January 31, 2024, co- and signed by its Director, Trade and Exchange, Hassan Mahmud, and Rita Sike on behalf of the Director, Banking Supervision, addressed to all banks, directed that NOP limit “should not exceed 20 per cent short or 0 per cent long of shareholders’ funds unimpaired by losses using the Gross Aggregate Method.”

The apex bank’s circular further noted that “banks whose current NOP exceed 20 per cent short of 0 per cent long of their shareholders’ funds unimpaired by losses are required to bring them to prudential limits by February 1, 2024.”

At a plenary session presided over by Speaker Tajudeen Abbas  on Wednesday, the House adopted a motion of matter of urgent national importance on the need for banks to implement CBN’s policies on holding excess long foreign exchange and NOP limits brought on the floor of the House by member representing Ikorodu Federal Constituency, Babajimi Benson.

The lawmaker noted that the CBN is saddled with the responsibility of regulating the monetary policies of the country as provided for by the CBN Act, stressing that “in the performance of this duty, the CBN is empowered to make regulations and give directives for commercial banks and certain financial institutions to implement.”

This is just as he also noted that Section 8 (4) and (5) of the CBN Act require that the CBN Governor “is expected to brief the relevant Committees of the National Assembly during the semi-annual hearings as well as provide periodic reports on the performance of the economy to the National Assembly.

“There has been a steady rise in the rate of the dollar in comparison to the naira. It rose to N1,520 to the dollar in the last week. This astronomical rise has been caused by diverse market forces and certain economic policies adopted by the government, including the liberalisation of the dollar.

“Commercial banks aThe House of Representatives on Tuesday mandated its Committees on Banking Regulations and Banking Institutions to conduct an investigative hearing on the non-compliance by commercial banks and financial institutions with the Central Bank of Nigeria’s directives on the Net Open Position Limits.nd certain financial institutions in Nigeria usually hold back a large part of forex they obtain either through purchase, borrowing or allocation from the CBN rather than lending to their customers with a view to selling it when the exchange rate is high.”

According to him, the speculative activity by commercial banks and certain financial institutions “has further exacerbated the harsh economic situation in the country and led to difficulty by legitimate businesses to obtain forex for their business transactions.

“The CBN has intervened by introducing new monetary policies to check the rise in the rate of dollar among which are the Net Open Position Limits and holding excess long foreign exchange.”

He recalled that commercial banks and certain financial institutions are reluctant to implement the monetary measures put in place by the apex bank to check this unwholesome practice.

Benson further argued that unless drastic legislative measures are taken to enforce the implementation of these directives, the country will continue to experience dire economic consequences occasioned by a continuous rise in foreign exchange rates.

Following the unanimous adoption of the motion, the House mandated its Committee on Legislative Compliance to ensure full implementation.