Nigeria: CBN bans foreign currency deposits

Aug 17, 2015

Governor Godwin Emefiele said the policy would help control the movement of illicit funds.

The Central Bank of Nigeria (CBN) and commercial banks have announced that they will stop accepting foreign currency deposits.

The CBN stated that account holders with foreign currency cash lodgements made prior to the ban can withdraw their foreign currency cash or the naira equivalent.

CBN Governor Godwin Emefiele told This Day newspaper the policy would help control the movement of illicit funds, adding that the banks decided to take that line of action because they felt that the level of foreign currency that they had in their vaults was above the optimum level that they could manage.

"When a bank has excess dollar cash in its vault, what is it going to do with it? If it continue to accept [dollars] from bank customers, they become useless pieces of paper in their because they are a non-earning asset," he said.

But critics of the ban worried about its impact on the naira. Chief Executive Officer of Financial Derivatives Company Bismarck Rewane said the move has created a multi-layer forex market and
would not address the fundamental problem of the actual pricing of the Nigerian currency.

The announcement led to a sharp volatility in the naira exchange rate against the dollar on the parallel market, with the Nigerian currency fluctuating between N210 and N235 to a dollar.ADNFCR-2976-ID-801797598-ADNFCR