Banks Defy CBN Directive as Dollar Scarcity Grips Nigeria’s Foreign Exchange Market

In the wake of recent market reforms introduced by the Central Bank of Nigeria (CBN), there are growing concerns that banks are neglecting the CBN’s directive to grant customers unrestricted access to foreign currencies from their domiciliary accounts.

Despite the changes implemented by the CBN, which have led to a significant transformation in the foreign exchange market, banks continue to restrict the amount of foreign currency that customers can withdraw, citing scarcity as the main reason.

Investigation reveals that this restriction by banks is impeding the supply of foreign currency to the market as dealers and customers are frustrated with the situation, complaining on how the scarcity of foreign currency is adversely affecting the market.

However, the market reforms have unintentionally resulted in exchange rate convergence, with the US dollar trading within a narrow band across all three segments of the market—the Investors and Exporters (I&E) window, the Bureau De Changes (BDCs), and the black market.

Meanwhile, dealers across all market segments are grappling with acute scarcity of US dollars, even though the CBN resumed supplying the foreign currency the previous week.

According to data from FMDQ, the I&E window’s exchange rate closed at N770.17 per dollar on Friday, reflecting a 16.2% depreciation of the Naira compared to the previous week’s closing rate of N663.04 per dollar.

In the parallel market, the Naira also depreciated, trading between N765 and N770 per dollar at the close of business, up from N759 per dollar the previous week.

The downward trend of the Naira in both the official market and parallel market began following the CBN’s announcement of “Operational Changes to the Foreign Exchange Market.”

These changes included the elimination of multiple exchange rates/segments and the reintroduction of the willing seller, willing buyer model in the I&E window.

Since the announcement, the Naira has experienced a 63% depreciation in the I&E window, starting from N471.67 per dollar on Tuesday, June 13th. In the same period, the Naira also depreciated by 20% in the parallel market, from N755 per dollar.