No restrictions on converting currency in domiciliary accounts to naira -CBN

… highlights internationally tradable goreign currencies

The Central Bank of Nigeria (CBN) has, in new guidelines, clarified that commercial, merchant and non-interest banks (CMNIBs) should allow participants to convert their Internationally Tradable Foreign Currency (ITFC) balances in designated domiciliary accounts into Naira at any time, using the prevailing exchange rate.

All conversions, however, must be fully disclosed and reported as part of the banks’ foreign exchange reporting requirements.

In February 2024, the CBN reaffirmed that it would not force domiciliary account holders to convert their holdings into Naira.

The new guidelines allow holders, whether they are based in Nigeria, abroad, or possess offshore accounts—full access to trade eligible foreign currencies as they wish.

“Foreign currencies in domiciliary accounts, held in offshore accounts by Nigerians, or held by Nigerians resident in Nigeria or
the diaspora, in cash or otherwise, retained in electronic form, can be traded,” the CBN said.

The announcement follows the release of the ‘Guidelines on Implementation of the Foreign Currency Disclosure, Deposit, Repatriation, and Investment Scheme, 2024,’ which builds upon Executive Order No. 15, a directive issued in 2023 for better oversight of foreign exchange assets held by Nigerian residents.

The directives aim to enhance transparency and streamline the management of foreign currency in Nigeria, reinforcing the CBN’s commitment to a structured and participant-friendly regulatory framework for foreign exchange.

According to the CBN’s guidelines, CMNIBs are expected to comply with a series of procedural requirements for handling ITFC under this scheme. Key directives include that banks are to open designated domiciliary accounts for participants, through which they can process conversions of ITFC into Naira without imposing restrictions on withdrawals or investment terminations.

CMNIBs must collect detailed information from applicants, including their Bank Verification Number (BVN), National Identification Number, Tax Identification Number, and the specific amount of ITFC to be deposited.

Interest rates on uninvested domiciliary account balances are to follow the established ‘Guide to Charges by Banks and Other Financial Institutions in Nigeria.’ Banks are permitted to trade with uninvested ITFC balances, provided these funds are available upon the participant’s request. CMNIBs are required to issue receipts within 24 hours of deposits, acknowledging the funds’ origin and confirming receipt for the scheme. They must also maintain confidentiality of participant data per Nigerian data protection laws.

CMNIBs have several obligations under this scheme. They must provide the CBN with reports on ITFC deposits and participant investments within 48 hours of a request. They must also track and report all ITFC investments and ensure compliance with all regulations associated with the Scheme. Additionally, CMNIBs must submit periodic returns to the CBN in accordance with Section 5.0 of the guidelines.

The guidelines emphasise that all financial institutions participating in this scheme must comply with applicable laws, including the CBN Act of 2007, the Banks and Other Financial Institutions Act of 2020 (BOFIA), and other relevant regulations. CMNIBs are expected to maintain comprehensive records of all transactions under the scheme and may be required to perform additional functions as directed by the CBN.