The House of Representatives is to investigate non-compliance by banks and financial institutions with the Central Bank of Nigeria directives on the Net Open Position limits.

The parliament mandated its committees on banking regulations and banking institutions to conduct the investigation and report back.

The resolution followed the adoption of a motion by Babajimi Benson (APC-Lagos) at the plenary in Abuja on Wednesday.

He stated that there had been a steady rise in the rate of the dollar in comparison to the naira, adding that diverse market forces had caused such an astronomical rise.

He added that the rise was also sequel to certain economic policies adopted by the government, including the liberalisation of the dollar. He said commercial banks and certain financial institutions in Nigeria usually hold back a large part of the forex they obtained through purchase, borrowing or allocation from the CBN.

He added that rather than lending to their customers, they would withhold it to sell it 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.

He said it had led to legitimate businesses’ difficulty obtaining forex for their business transactions. 

He said the CBN had intervened by introducing new monetary policies to check the rise in the dollar rate, among which were the net open position limits and holding excess long foreign exchange.

He said commercial banks and certain financial institutions were reluctant to implement the monetary measures put in place by CBN to check such unwholesome practices by banks and other financial institutions in the country.

He stated that unless drastic legislative measures were taken to enforce the implementation of these directives, the country would continue to experience dire economic hardship.

This is a result of the continuous rise in foreign exchange rates.

The parliament, however, mandated the Committee on Legislative Compliance to ensure full implementation.

The CBN said the NOP limit of banks’ overall foreign currency assets and liabilities should not exceed “20 per cent short or zero per cent long of shareholders’ funds.” 

(NAN)