The Central Bank of Nigeria (CBN) via the Director, Corporate Communications, Mr. Osita Nwanisobi, disclosed in a statement that it was not planning to convert the foreign exchange (FX) in domiciliary accounts of bank customers into naira.
“If the CBN decides to convert domiciliary amounts to naira, it means that Nigeria’s foreign reserves could rise by about 43% to USD49.8billion.”
Such a move by the CBN has long been rumoured as the apex banks struggles to defend the naira. The apex bank disowned a circular dated ‘September 13, 2021’ purportedly announcing that deposits in all domiciliary account forcibly are to be converted into naira. The fake circular bearing the name, logo and address of the CBN has been circulating on social media.
Our examination of the CBN’s international investment position data reveals that the total value in domiciliary accounts as of 2020 was USD15.0billion. If the CBN decides to convert domiciliary amounts to naira, it means that Nigeria’s foreign reserves could rise by about 43% to USD49.8billion. This will offer increased support for the CBN to defend the naira, and offset some of its pending fx outflows via import bills, payment of interests on external debts and increased fx intervention sales in the I&E window.
But this is a double-edged sword. CBN controls, interventions and restrictions on free transaction in foreign exchange which have fuelled the rumours of a forced conversion of holdings in domiciliary accounts significantly have constrained inflows of forex into Nigeria. Any CBN move to execute a forced conversion will send alarm signals out to persons and businesses who may want to bring or keep foreign exchange in Nigerian banks. Arbiterz interviews revealed that the possibility of CBN forced conversion has actually deterred some from keeping foreign exchange deposits in Nigerian banks. The CBN has in the past imposed several controls on depositing or withdrawing from domiciliary accounts.
According to the statement by Mr. Nwanisobi, “Operators of domiciliary accounts and other members of the banking public are therefore advised to completely disregard these fictitious documents and malicious rumours, and go about their legitimate foreign exchange transactions, as we do not doubt that these rumours are only aimed at impugning the integrity of the CBN and activating chaos in the system.”
He pointed out that any circular issued by the apex bank would usually be posted on its website (www.cbn.gov.ng) for the attention of the public.
The bank further warned corporate bodies and members of the public against the unauthorised use of the CBN logo for any purpose whatsoever, adding that the attention of appropriate authorities had been drawn to this effect while culprits would be sanctioned accordingly.