- Naira Shortage Forces Banks to Boycott CBN Dollar Sale
Deposit Money Banks lacked naira liquidity to bid for the $100m offered for sale by the Central Bank of Nigeria on Thursday.
Findings showed that banks were unable to buy over $39m out of the $100m offered for bid by the apex bank.
The Nigerian interbank lending rates rose sharply by around 100 percentage points on Thursday, as commercial lenders scrambled for cash to pay for bond purchases and cover their positions.
Overnight lending rates rose to around 300 per cent from 200 per cent at the end of trading on Wednesday, as naira liquidity dried up in the banking system and some banks were forced to borrow from the CBN, Reuters reported.
The Federal Government raised N105.32bn from bond sales last week, and payment for the debt sale was due on Thursday, draining liquidity in the market and pushing further up the cost of money in the market.
The CBN has consistently sold dollars at both the spot and forward markets, and required banks to pay for the purchase. This has drained liquidity in the market.
The nation’s financial markets were closed on Thursday for the Easter celebrations and will reopen on Tuesday.
The CBN had last week opened a special forex window for the Small and Medium-scale Enterprises to enable entrepreneurs to import eligible finished and semi-finished items not exceeding $20,000 for an enterprise per quarter.
The regulator also opened a special forex window for the remittances of dividends denominated in foreign currencies abroad.
The move came after the regulator made a special intervention in the Bureau de Change segment of the foreign exchange market which resulted in each operator accessing $20,000 as against the earlier stipulated $10,000 per week.
Despite the series of dollar supplies into the various segments of the forex market, the naira closed at 410 against the United States dollar on Thursday, fuelling concerns about the CBN dollar interventions.
The local unit closed at 410/dollar consecutively from Tuesday to Thursday.
Justifying part of the recent spate of interventions, the Acting Director, Corporate Communications, CBN, Mr. Isaac Okorafor, said, “The special interventions were necessitated by its findings that a large number of the SMEs were being crowded out of the forex space by large firms and also service genuine demand for invinsibles like tuition fees, medical and personal/basic travel allowance.”
However, analysts have said the naira is likely to strengthen this week on increase in dollar sales to foreign exchange bureaus.
The CBN is reportedly planning to raise dollar sales to BDCs to $40,000 from the present $20,000, which will improve liquidity and help support the local currency.
The local currency was quoted at 410 to the dollar on the black market on Friday, compared with 398 to the dollar last Friday.
At the official window, it closed at 306.10 to the dollar on Thursday against 306.20 per dollar last week.