Informed sources told Vanguard that the development follows the decision of the Central Bank of Nigeria, CBN, to interbuhari-Nairavene in the foreign exchange market.
It was gathered that the CBN issued a circular to sell additional $30,000 to all licensed bureaux de change (BDCs) in the country on Friday, apart from the weekly sale of $30,000 that the apex bank normally makes to each BDC.
Earlier in the day, naira exchanged for as high as N235 to a dollar, but a parallel market source noted that the news of the CBN circular prompted various firms to hurriedly sell off the dollars in their possession leading to increase in supply of dollars to the market and thus crashing the exchange rate.
The hurried sale is in anticipation that the market would be flooded by dollars when the additional sale is made by the apex bank on Friday. The official exchange rate remains pegged by CBN at N197 to a dollar.
Vanguard investigations on Tuesday had revealed that the naira depreciation was as a result of panic buying of the dollar in the hope that it would further depreciate. Sources said that there was hoarding of foreign currency going on at the unofficial market.
They said the appreciation of the naira last week was temporary and that the exchange rate was most likely to return to its previous level.
The naira had last week appreciated by N35 fromN245 per dollar to N210, due to excess dollars in the market, occasioned by refusal of banks to allow foreign currency deposits into domiciliary accounts.
Banks reject foreign currencies deposit
Meanwhile, Vanguard gathered that commercial banks have started rejecting deposit of all other foreign currencies in addition to dollars.
It would be recalled that last week, banks stopped accepting dollars because they had too much cash in their vaults – reported to be in excess of $1 billion —in a desperate measure taken to mitigate currency risk.
Contrary to the reports that the excess was caused by CBN’s refusal to accept dollar deposit from banks in return for credit into their foreign accounts, Head of Foreign Exchange unit of a Tier 2 bank told Vanguard that the decision of the CBN was in response to the increasing volume of dollar deposit from banks for credit into their foreign accounts.
He said hitherto banks don’t take the dollars to the CBN but swap it among themselves. “Banks with surplus dollars exchange it for naira with banks with deficit. CBN was not involved. But when the volume of dollars in the system became more than what the banks entirely needed, they started taking it to the CBN to swap it for credit into their foreign accounts. But when the CBN observed an increasing trend in the volume of dollars banks were bringing for transfer, it decided to discontinue to the service. So what the CBN did only aggravate it, but it was not the source of the problem.”
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