From Ndubuisi Orji, Abuja
House of Representatives has resolved to investigate alleged non-compliance by banks and other financial in stitutions with the directives of the Central Bank of Nigeria ( CBN) on the Net Open Position limits on foreign ex- change.
The House mandated its Committees on Banking Regulations and Legislative Compliance to undertake the probe and ensure compliance with the directives of the apex bank. This followed the adoption of a motion by Babajimi Benson, on “need for banks to implement CBN policiet on holding excess long foreign exchange and net position limits”. Benson, in his lead debate, explained that the fluctuation of the dollar rate in the last two months has had devastating effects on the country, leading to rise in the cost of living and hardship for millions of Nigerians.
He stated that “while the liberalization of the dollar i.e leaving the rate for market forces to determine, is, in it- self, is not a bad policy, sharp practices by many banks and financial institutions have continued to worsen the forex liquidity problem being experienced in the country and has led to massive distortion in the FX market especially as it concerns the rates.”
He explained that the CBN has intervened in the foreign exchange crisis by “introducing new monetary policies to check the rise in the rate of dollar among which are the Net Open Position Limits and holding excess long foreign exchange.”
Nevertheless, the lawmaker noted that “ commercial banks and certain financial institutions are reluctant to implement the monetary measures put in place by the apex bank to check this unwholesome practices by banks and other financial institutions in the country. “
Benson stated that it is worrisome that some financial institutions in the country usually hold back a large part of foreign exchange obtained either through purchase, borrow or allocation from the CBN. He stated that the affected institutions hold back the foreign exchange so as to sell when the exchange rate is high.
According to him, “this speculative activity by commercial banks and certain financial institutions has further exacerbated the harsh economic situation in the country and led to difficulty by legitimate businesses to obtain forex for their business transactions.
“Unless drastic legislative measures are taken to enforce the implementation of these directives, the country will continue to experience dire economic hardship as a result of continuous rise in foreign exchange rates.”