Forex

CBN’s Lending to Banks Rises to N1.6tr

Published

7 years ago

February 28, 2017

Forex: CBN’s Lending to Banks Rises to N1.6tr

BankS’ borrowing from Central Bank of Nigeria (CBN) rose sharply to N1.6 trillion last week, triggered by demand for funds to participate in the special foreign exchange auctions conducted by the apex bank.

Under the CBN forex rule, banks are to provide the Naira equivalent of dollar purchases from the CBN. During the week, the CBN conducted two 60-days forwards sale of $600 million to the banks. This triggered intense demand and acute scarcity of funds in the interbank money market, which prompted banks to besiege the Standing Lending Facility (SLF) of the CBN to borrow the Naira required to fund their dollar purchases.

Average Daily Borrowing

Consequently, banks borrowing shot up by 98 per cent to N1.6 trillion last week, from N821.4 billion the previous week. Similarly, average daily borrowing through the SLF jumped to N321 billion last week from N205 billion the previous week.

Investigation reveal that most of the borrowing occurred on Wednesday, during which banks took N433 billion to fund the $370 million sold on Tuesday by the CBN.

The apex bank had offered $500 million 60-days future on Tuesday. According to a CBN official who confirmed this development to Financial Vanguard under condition of anonymity, most of the banks did not have the Naira to buy the dollars offered by the apex bank, hence only $370 million was sold that day. A similar situation re-occurred on Thursday when banks borrowed N392 billion to participate in the $230 million sold by the apex bank that day.

Meanwhile, amount of idle cash (liquidity) in the interbank money market fell by 74 per cent during the week, in response to the intense demand for funds triggered by the CBN dollar sales. From N175.29 billion on Monday, market liquidity fell steadily closing the week at N45.65 billion. This was despite inflow of N412 billion comprising N198 billion through matured treasury bills and N214 billion from statutory allocation funds.

This prompted wide volatility of interbank interest rates during the week, with interest rate on Overnight borrowing climbing to 200 per cent on Thursday from 17 per cent the previous week, before dropping to 175 per cent at the close of business on Friday.

However, the CBN dollar sales halted the depreciation of the Naira in the parallel market, where it posted its biggest weekly appreciation against the dollar last week. Market survey revealed that the Naira exchange rate in the parallel market dropped from N520 per dollar the previous week to N460 per dollar at the close of business on Friday.

Analysts however project that the Naira appreciation may be short-lived saying that the Naira might lose some of the appreciation recorded last week.

“Parallel market will appreciate towards N460 per dollar before bouncing back to N480 per dollar in a cobweb movement,” analysts at Financial Derivatives Company projected.

Also analysts at Afrinvest Plc, a Lagos based investment firm stated: “It is hard to make an exact call on direction of rate, but it is unlikely the parallel rate will breach the N500 per dollar mark again in the shorter term as a more dollar liquid CBN will not shy from further interventions.

Yet, our medium term conviction remains that maintaining the interbank rate at current peg (without implementing deeper reforms required) will lead to deterioration in current account as more demand surfaces. Hence, there is still a need to address the FX liquidity challenge appropriately and we reaffirm our view that increased flexibility will be needed in order to allow restore investor confidence and boost autonomous FX supply.”

Up Next

Dollar Free Fall Continues, Sells at N425/dollar

Don't Miss

Japan Stock Rally Falters as Yen Gains Before Trump

Samed Olukoya

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

Comments

Naira

Dollar to Naira Black Market Today, April 19th, 2024

As of April 19th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,100 NGN in the black market, also referred to as the parallel market or Aboki fx.

Published

11 hours ago

April 19, 2024

Samed Olukoya

As of April 19th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,100 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,020 and sell it at N1,010 on Thursday, April 18th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate declined slightly when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.

Black Market Dollar to Naira Exchange Rate

Buying Rate: N1,100
Selling Rate: N1,090

Naira

Naira’s Recent Gain Reflects Policy Direction, Says CBN Chief Olayemi Cardoso

Published

1 day ago

April 18, 2024

Samed Olukoya

Olayemi Cardoso, Governor of the Central Bank of Nigeria (CBN), has explained that the recent surge in the Naira is a testament to the positive direction of government policies rather than active intervention to defend the currency’s value.

Addressing attendees at the spring meetings of the International Monetary Fund and World Bank in Washington, Governor Cardoso underscored that the CBN’s intention is not to artificially prop up the Naira.

He clarified that the fluctuations observed in the country’s foreign exchange reserves were not aimed at defending the currency but rather aligning with broader economic goals.

Over the past month, the Naira has experienced a notable uptick in value against the dollar, signaling a reversal from previous declines. Data from Bloomberg reveals a 6.4% decrease in liquid reserves since March 18, coinciding with the Naira’s rebound.

Despite this decline, Cardoso pointed out that around $600 million had flowed into the reserves in the past two days, reflecting confidence in the Nigerian market.

Governor Cardoso articulated the CBN’s vision of a market-driven exchange rate system, emphasizing the importance of allowing market forces to determine exchange rates through willing buyers and sellers.

He expressed optimism about a future where the central bank’s intervention in the foreign exchange market would be minimal, except in extraordinary circumstances.

The recent resilience of the Naira follows a period of volatility earlier in the year, marked by a substantial devaluation in January. Since then, the CBN has implemented measures to stabilize the currency, including monetary tightening and initiatives to enhance dollar liquidity.

Cardoso highlighted the transformation in market sentiment, noting that investors now perceive Nigeria’s central bank as committed to stabilizing inflation and fostering economic stability.

As Nigeria continues its journey toward economic recovery and stability, Cardoso’s remarks provide insight into the central bank’s strategy and its impact on the country’s currency dynamics.

Naira

Dollar to Naira Black Market Today, April 18th, 2024

As of April 18th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,020 NGN in the black market, also referred to as the parallel market or Aboki fx.

Published

2 days ago

April 18, 2024

Samed Olukoya

As of April 18th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,020 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,050 and sell it at N1,040 on Wednesday, April 17th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate improved when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.