Breaking: CBN grants banks approval to trade idle FX deposits from ‘designated domiciliary’ accounts

The Central Bank of Nigeria (CBN) has given the green light to the commercial, merchant, and non-interest banks operating in Nigeria to trade with tradeable foreign currencies deposited in dorm accounts created under the foreign currency disclosure, deposit, repatriation, and investment scheme which were not invested immediately.

The bank disclosed this in its recently approved guidelines for the implementation of foreign currency disclosure, deposit, repatriation, and investment scheme which is billed to commence on November 6, 2024.

The CBN explained that the foreign currency deposits being invested by the banks should be made available upon request by participants.

Furthermore, the apex bank noted that approved banks should provide monthly returns from the scheme no later than the 14th of the next month.

It stated, “CMNIBs may trade with any deposited ITFC not immediately invested by a participant, provided that the funds would be made available to the participant when needed.” 

“Interest on Uninvested Funds Interest payment by CMNIBs on the balance in the designated domiciliary account shall be in line with relevant provisions of the Guide to Charges by Banks and Other Financial Institutions in Nigeria.” 

“RENDITION OF RETURNS a. Every CMNIB shall render monthly returns (in line with a template to be advised by the Banking Supervision Department) to the Bank on the operation of the Scheme not later than the 14th day of the following month.” 

Guidelines in reporting returns under the scheme

The CBN also required all banks participating in the Scheme to submit detailed reports to ensure transparency and effective oversight.

• The reports must include the total number of participants currently enrolled in the Scheme, as well as the total value of Investment Funds Transfer Certificates (ITFC) received both during the reporting period and cumulatively for the financial year.

• Additionally, banks are required to provide an update on applications received and processed, including any notable trends or challenges encountered during the review process, and also disclose all financial transactions conducted under the Scheme, specifying the investments made in permissible instruments and sectors.

• It warned that any uninvested ITFCs must also be accounted for, ensuring that the CBN is informed of the total value of funds that remain unallocated.

Finally, it stated that banks must submit a statement of uninvested ITFCs held with the CMNIB along with a record of transactions such as trades, investments, and loans funded from these uninvested ITFCs.

The CBN noted that it may also request additional information to support its monitoring and evaluation efforts.

What you should know

The new guidelines from the CBN come less than a week after the Federal Government launched a 9-month window for Voluntary Currency Disclosure, Depositing, Repatriation, and Investment Scheme, known as the “Disclosure Scheme,” under Executive Order No. 15 of 2023.

• This scheme allows Nigerians holding foreign currency to disclose and deposit these funds in banks, providing an opportunity to bring overseas assets into the formal financial system.
• To encourage participation, the government offers several incentives for Nigerians both at home and abroad, including tax immunity, asset protection, confidentiality, interest on deposits, and flexible options for repatriating funds.