Banks ignore CBN’s directive on domiciliary accounts
Exchange rates converge around N770/$
The Central Bank of Nigeria, CBN, directive that banks should grant their customers unfettered withdrawal of foreign currencies from domiciliary accounts appears to have been ignored, Vanguard reports.
This is as Nigeria’s foreign exchange market has recorded a drastic change following the market reforms introduced by the CBN, previous week.
Investigations revealed that the banks continue to restrict the amount of foreign currency that customers can withdraw from their accounts saying the currencies are still scarce.
However, the change in both structure and operations of the foreign exchange market has resulted in exchange rate convergence by default as the US dollar traded within narrow band across the three segments of the market, namely, the Investors and Exporters (I&E) window, the Bureau De Changes (BDCs) and the black market.
And for the first time, the exchange rate in the official market (I&E) surpassed what obtained in the black market.
Meanwhile, dealers across all the segments are facing acute scarcity of the US dollars while CBN resumed supply of the foreign currency last week, though at a very low volume.
The Naira last week depreciated further to N770.17 per dollar in the I&E window, with currency dealers projecting further deterioration of the dollar scarcity, a situation which may propel further depreciation of the local currency this week.
According to data from FMDQ, the I&E window exchange rate closed at N770.17 per dollar on Friday. This represents 16.2 per cent week-on-week, WoW, depreciation of the Naira when compared with the closing rate of N663.04 per dollar the previous week.
The Naira also depreciated in the parallel market, where the dollar traded within the range of N765 and N770 per dollar, at the close of business, up from N759 per dollar the previous week.
The Naira has been on the downward trend in both the official market and parallel market, since the Central Bank of Nigeria, CBN announced, “Operational Changes to the Foreign Exchange Market,” including elimination of multiple exchange rates/segments and re-introduction of willing seller, willing buyer model in the I&E window.
Since the changes were announced the previous week, the Naira has depreciated by 63 per cent in the I&E window, from N471.67 per dollar on Tuesday June 13th.
During the same period, the Naira also depreciated by 20 per cent in the parallel market from N755 per dollar.
Findings from currency dealers showed that the depreciation is driven by acute dollar scarcity in both I&E and the parallel market.
“Though the CBN intervened in the I&E window on Thursday, the market is still very short, in terms of supply. The volume of sales by the CBN was not much. The highest volume sold per buyer was $5 million dollars. Some others got $2.5 million while others got between $250,000 and $1 million.
“They, however, sold only to people that bided at an exchange rate above $761 per dollar.
“After the CBN’s sales, some international organisations also sold but the volume was small compared to the demand, especially given the backlog of matured obligations. I will say the market is still evolving and going through a price discovery process. The volatility will continue with the Naira further depreciating, depending on dollar supply coming into the I&E window.
“The true exchange rate will only emerge when all the backlog of dollar demand has been satisfied.
Bureaux De Change, BDC, operators and parallel market operators lamented the dollar scarcity in the market, noting that banks are yet to comply with the directive of the CBN that they should allow customers have unfettered access to funds in their domiciliary accounts.
Mallam Ahmed Yunusa, a black market trader in Lagos, said: “The market has been very busy since last week after the CBN eased its restrictions on forex trading in banks.
“A dollar was sold for N770 today (last Friday) because I bought a dollar for N765 making just N5 profit. However, over the week, the dollar has been traded at N745 to N770.
“The reason for this is because most of our customers who visited the banks complained the demand for dollars is higher than the supply and that the banks don’t have enough dollars to go round hence the rise in the price for the willing buyers.
“Most traders at the parallel market decided to sell a bit less or higher within the price range of banks to keep our customers as the competition becomes tougher.
“I see a continuous rise in the volume of demand for the dollar as we approach the end of the year and an appreciation of the Naira to N500 or N600 per dollar in the near term if dollar supply increases.”
On his part, Mallam Umoru Mohammed, another black market trader in Lagos, said: “The dollar has been trading since last week from N740 to N770. Today the dollar was traded at N750.
“Here in Ikorodu, businesses have been dull as not many sold dollars to us hence I was not able to get supply of dollars due to the higher demand of dollars than supply.
“I see the Naira depreciating to N800 per dollar due to the inability of traders to meet the demands of buyers as we approach the remaining half of the year but if there is more forex inflows the reverse will be the case.”
