Nigerian Banks Barred From Holding Funds In Dollars

Nigerian Banks Barred From Holding Funds In Dollars
The move is s an attempt by Nigerian authorities to protect the country’s currency amidst falling oil prices

AFRICANGLOBE – The Central Bank of Nigeria today barred banks from holding their own funds in dollars in a bid to to end the speculative pressure on the naira that has seen it fall over 12 percent against the dollar this year.

“We do not want speculators in this market any longer,” the Central Bank governor, Godwin Emefiele, told Reuters in a phone interview today after the decision was taken. He added that he believed the current Naira band, set last month at N160-N170, was “appropriately priced at this time,” meaning that the CBN will continue to defend the currency even as it is currently trading below the band. Reuters reports that the naira fell to a record low of 188.85 to the dollar after his comments.

Dealers reluctant to trade Naira after new rules

According Reuters, Nigerian currency traders were mostly reluctant to quote prices for the naira today amid confusion about the impact of a central bank adjustment to foreign exchange trading regulations. The financial regulator stipulated overnight that dealers had to reduce the percentage of “shareholders funds” that they could hold in dollars from 1 percent to zero. “Any infraction of the requirement of this circular … will attract appropriate sanction, which may include suspension from the foreign exchange market,” the circular signed by Trade and Exchange Department Director Olakanmi Gbadamosi said.

Reuters said no prices were quoted for nearly an hour after the market opened, after which very few trades were executed. The news quoted dealers as saying that most of them were not trading while they conclude discussions on how to proceed with regard to the new rules.

The currency of Africa’s biggest economy has been battered by the drastic fall in global oil prices, it was devalued by 8 percent in a bid to halt the slide of its foreign exchange reserves.

 

By: Onyedimmakachukwu