Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks

CENTRAL BANK OF NIGERIA Corporate Head Office Central Business District P.M.B. 0187, Garki, Abuja, FCT 09-462-37831 09-462-37809 TRADE AND EXCHANGE DEPARTMENT ted@cbn.gov.ng TED/FEM/PUB/FPC/001/001 January 31, 2024 LETTER TO ALL BANKS HARMONISATION OF REPORTING REQUIREMENTS ON FOREIGN CURRENCY EXPOSURES OF BANKS The Central Bank of Nigeria (CBN) has noted with concern the growth in foreign currency exposures of banks through their Net Open Position (NOP). This has created an incentive for banks to hold excess long foreign currency positions, which exposes banks to foreign exchange and other risks. Therefore, to ensure that these risks are well managed and avoid losses that could pose material systemic challenges, the CBN issues the following prudential requirements:

1. Prudential Requirements a) The Net Open Position (NOP) limit of the overall foreign currency assets and liabilities taking into cognizance both those on and off-balance sheet should not exceed 20% short or 0% long of shareholders' funds unimpaired by losses using the Gross Aggregate Method.

b) Banks whose current NOP exceed 20% short and 0% long of their shareholders' funds unimpaired by losses are required to bring them to prudential limit by February 1, 2024.

c) Banks are required to compute their daily and monthly NOP and Foreign currency trading position (FCTP) using the attached templates.

d) Banks are also required to have adequate stock of high-quality liquid foreign assets, i.e. cash and government securities in each significant currency to cover their maturing foreign currency obligations. In addition, banks should have in place a foreign exchange contingency funding arrangement with other financial institutions.

2. Other Requirements

a) Banks should borrow and lend in the same currency (natural hedging) to avoid currency mismatch associated with foreign currency risk.

b) The basis of the interest rate for borrowing should be the same as that of lending i.e. there should be no mismatch in floating and fixed interest rates, to mitigate basis risk associated with foreign borrowing interest rate risk.

c) With respect to Eurobonds, any clause of early redemption should be at the instance of the issuer and approval obtained from the CBN in this regard, even if the bond does not qualify as tier 2 capital.

d) All banks are required to adopt adequate treasury and risk management systems to provide oversight of all foreign exchange exposures and ensure accurate reporting on a timely basis.

e) Banks are expected to bring all their exposures within the set limits immediately and ensure that all returns submitted to the CBN provide a accurate reflection of their balance sheets.

Please, note that non-compliance with the NOP limit will result in immediate sanction and/or the suspension from participation in the foreign exchange market.

Yours faithfully,

TOR, TRADE AND EXCHANGE RITA IJEOMA SIKE (MRS.) FOR: DIRECTOR, BANKING SUPERVISION

| In % of

Capital	10	E O.O000%
Overall net positions	on	Difference
Positions in local currency	Off Bai. Sheet, net	8
Phone:	Local ccy rates Balance sheet, net
EW	Assigned NOPL
	Overall long/Short position
Cross Rates
Contact Person:	USD/NGN RATE[
Overall net positions	4
Off Bal. Sheet, net
Position in foreign currencies	Net Foreign currency positions
Balance Sheet, net	N	Capital
Reporting Bank:
CCY	AED	AUD	18	CNH	CNY	DKK	EUR	INR	互	lela	ZAR

REPORT ON FOREIGN EXCHANGE EXPOSURE At Close of Business on

TOTAL
OTHERS
GBP
EURO	08170. Direts
Real Preferences (2010 Position (2010)
Aconteraction Posimonital
Aconterante Coloma Posimonita
Coroneconte Coloma Posimonima
Crosse Acores Primer Progrill
US DOLLARS
thly Return On Net Foreign Assets (Gross Aggregate Me
y/Monthly Return On Net Open Positio	205: Others	3170: Others
s at ***