CBN Takes Measures to Boost Forex Liquidity, Limits Banks’ Forex Position

The Central Bank of Nigeria (CBN) has directed banks to limit their Net Open Position (NOP) of foreign currency assets and liabilities to 20 percent of shareholders’ funds to enhance liquidity in the forex market.

The order, outlined in a January 31, 2014 CBN Circular, requires banks exceeding the specified NOP to bring them to the prudential limit by February 1, 2024.

The CBN emphasized the need for adequate stock of high-quality liquid foreign assets, foreign exchange contingency funding arrangements, and adherence to natural hedging practices. Non-compliance with the NOP limit may result in sanctions or suspension from the forex market.

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