In a sweeping change to its monetary policy, the Central Bank of Nigeria (CBN) has unveiled an initiative that will significantly enhance the operations of domiciliary account holders across the country. In a statement issued by the CBN, the central banking institution declared the removal of cash deposit limitations on domiciliary accounts, thereby bestowing upon account holders the freedom to withdraw up to $10,000 per day. This remarkable development from the CBN is a clear indication of the country’s shift towards a more flexible monetary policy, designed to give individuals greater latitude in managing their domiciliary account funds.
The public announcement from the Central Bank of Nigeria emerged from an extraordinary Bankers’ Committee meeting. After a round of deliberations, the institution rolled out this directive with the intent of providing comprehensive guidance to banks regarding the implementation of operational changes in the foreign exchange market.
This major move by the CBN was announced on the heels of the bank’s unification of all segments of the Nigerian forex market. Earlier in the week, the bank had taken strides to collapse all windows into the Investors & Exporters (I&E) window, signaling a decisive shift in its approach to currency management.
Haruna Mustafa, Director of the Banking Supervision Department at the Central Bank of Nigeria, signed off on the press statement. The statement clarified that the meeting was convened with the aim of discussing the potential implications of these policy changes for the banking public and planning the course of action for their implementation.
In the words of the Central Bank of Nigeria, the objective of these policy amendments is to “promote transparency, liquidity, and price discovery in the FX market, with the overarching goals of enhancing FX supply, discouraging speculative practices, bolstering customer confidence and ensuring overall stability in the FX market.”
The new changes effectively mean that ordinary domiciliary account holders now have unrestricted and unfettered access to their funds. They are now authorized to use cash deposits not exceeding USD$10,000 per day or its equivalent via telegraphic transfer. Deposit Money Banks (DMBs) are now mandated to provide reports to the CBN detailing the ‘purpose’ of such transactions.
The announcement also highlighted that cash deposits into domiciliary accounts will no longer face any restrictions. This change, however, is subject to DMBs conducting due diligence and adhering strictly to the spirit and the letter of extant laws, as well as other relevant rules and regulations.
In terms of eligible transactions, the Central Bank of Nigeria has clarified that all visible and invisible transactions, such as medical expenses, school fees, BTA/PTA, airline, and other remittances are valid for the Investors’ and Exporters’ (I & E) window. Banks have been directed to ensure swift processing of all eligible invisible transactions on behalf of their customers using the rate applicable on the official window.
Furthermore, the CBN has asserted its commitment to prioritizing the orderly settlement of any committed FX forward transactions, aiming to further boost market confidence. The bank has also promised to normalize its Cash Reserve Ratio (CRR) maintenance processes and ensure fairness in its application across the entire banking industry.
Before this ground-breaking announcement, individuals maintaining domiciliary accounts faced stringent limitations on cash deposits and withdrawals. These restrictions often posed challenges to international transactions. This game-changing move by the Central Bank of Nigeria is set to empower the country’s banking sector and provide account holders with much-needed flexibility in managing their funds.