The Central Bank of Nigeria (CBN) has introduced revised guidelines for Deposit Money Banks (DMBs) concerning the deposit of excess foreign currency notes. This update, aimed at stabilizing the exchange rates between the parallel and the official markets, was announced on Friday and will be implemented at the CBN’s Lagos and Abuja branches.

The initiative comes in response to the disparate rates experienced on Friday, with the official foreign exchange (FX) closing at N1,505.30 while the black market rate stood at N1,520. The move by CBN aims to tighten these discrepancies, thereby stabilizing the naira.

Under the new guidelines issued in a circular on June 27, 2024, the CBN has granted approval for DMBs to deposit their excess foreign currency notes directly with the Central Bank. This process will facilitate the onward credit of these funds to the banks’ offshore accounts with their correspondent banks, addressing an increasing demand among DMBs to manage their forex holdings more efficiently.

DMBs wishing to make such deposits must adhere to specific procedures and limitations set forth by the CBN. Banks are required to provide at least three working days’ notice before making a deposit, with the notice to be addressed in writing to the Branch Controller of CBN Lagos or Abuja. This notification must include detailed information about the owners of the foreign currency to be deposited.

To manage these transactions effectively, the CBN has also established maximum daily deposit limits based on currency denominations. For higher denomination USD notes (USD100 and USD50), the limit is set at USD10 million per day. For lower denomination USD notes (USD20 and below), the limit is capped at USD1 million daily. Similarly, the daily limits for GBP and Euro notes are set at GBP1 million and EUR1 million, respectively.

Furthermore, the CBN requires that two representatives from the depositing bank be present during the deposit to witness and verify the amounts being deposited. The foreign currencies accepted for deposit include various denominations of USD (USD100, USD50, USD20, USD10, USD5, USD1), as well as all denominations of GBP and Euros. Each denomination must be separately packaged in designated boxes to ensure orderly processing.

The revised guidelines come at a critical time as the naira experienced a 1.94 percent depreciation against the dollar over the course of the month. Despite increased dollar sales, which rose by 54.12 percent to $187.82 million from $121.87 million recorded earlier in the month, the naira closed at N1,505.30 from an opening rate of N1,476.12, according to data from the FMDQ Securities Exchange Limited.

In the parallel market, the depreciation was even more pronounced, with the naira losing 2.63 percent as the dollar was quoted at N1,520 to close FX trading for the month, a significant rise from N1,480 quoted at the beginning of June.