CBN stops daily currency auction for banks
Godwin Emefiele, CBN Governor
Dollar may sell for N320 at parallel market this week
STILL exploring ways of conserving foreign exchange (forex), the Central Bank of Nigeria (CBN) has discontinued its daily auction to banks . The banks are now to begin self-sustenance by sourcing forex by themselves.
The development may mean that the regulator will now be intervening in the foreign exchange market occasionally and will leave banks with the determination of how much of the deposited foreign currencies by the customers will be disbursed back to them.
CBN had on Monday unveiled a new foreign exchange plan, in which bureau de change (BDG) operators were shut out of the official weekly intervention.
But an analyst who spoke to The Guardian on a condition of anonymity said the move was a subtle approach similar to that of the BDCs.
The Director of Financial Market, CBN, Emmanuel Ukeje, affirmed the apex bank’s position, saying: “We will not sell (dollars) on a daily basis any more. Whenever we do the auction everybody bids.”
Before now, commercial banks used to make naira provisions to the CBN with their bid for foreign exchange ahead of the auction, which is conducted daily for sectors.
According to Ukeje, banks are now responsible to their customers as they accept their foreign currency deposits, warning that banks cannot come to CBN to ask for dollars to settle their obligations, hence the need for them to manage their dollar resources effectively.
He said: “If a customer gives a bank dollars and wants the bank to transfer them, inadvertently, what the person has done earlier is to let the bank hold that money on the person’s behalf and to bring it out when the person demands it.
“Banks that issue the naira and dollar cards take responsibility now. They must make sure that they have enough of the denomination to back up your demand. This is different from before, when they commit and run to CBN because it would immediately become a national issue.”
Meanwhile, the persistent crash of the naira on the parallel market may not have reached its climax as speculations are rife that the local unit will hit N320 to the dollar next week, if the shortage persists.
Already, the initial response to the regulator’s announcement to end dollar intervention in the BDC’s segment has remained sharp, with demand for dollars rising.
However, yesterday the naira was steady at N300 to the dollar at the parallel market, while the official interbank market also remained unchanged at N199.50 per dollar.
CBN had at the weekend, substituted the outright ban on dollar sales to BDG with an offer that they should now source their forex from International Oil Companies (IOCs).
The Guardian learnt that the earlier move to end the dollar intervention for the BDCs was to prevent a further depletion of Nigeria’s foreign exchange reserves.
The decision to use foreign exchange earnings from IOCs, which is part of the autonomous sources, was reached at the end of a meeting between CBN and the leadership of the Association of Bureau De Change Operators of Nigeria (ABCON).
Henceforth, whatever amount available from the sources will be shared between BDCs and commercial banks at rates that will ensure the stability of the naira.
“The issue now is the reserve, which is dwindling and they don’t want to use it for market intervention. The only thing is that the volume is small. It is now like a competitive market, but no matter the volume, it is better than shutting down the market.
“The new deal will ensure that no one sells at higher margins, which will also compromise the naira exchange rate, and it is a very good development. But our direction now is to form a crack team to ensure that any of our members found wanting will be dealt with,” the Acting President of ABCON, Alhaji Aminu Gwadabe said.
ABCON had earlier at the weekend, in a statement issued after its emergency general meeting, sought the reversal of the policy; review of the N35 million caution fee; and a definition of “autonomous sources” contained in the CBN’s statement.
It sought inclusion on the Bankers’ Committee membership; regular trainings for BDC operators; and fulfillment of a pledge by the CBN to engage the operators in foreign transfer transactions similar to Western Union.
But Gwadabe noted that given the huge demand for foreign exchange, supply shortfalls and the concomitant widening of the gap between the official and parallel market exchange rate, many individuals may not be able to resist the temptation to engage in rent-seeking and round-tripping.
These individuals are not limited to BDCs, but also include banks and other participants in the foreign exchange market. The only way to deter such illegalities is to impose heavy sanctions including cancellation of their operating licence.
“We urge Governor Emefiele to do what Joseph Sanusi as CBN Governor did in 2001 when he suspended the foreign exchange dealership of 21 banks for foreign exchange malpractices.
“We also urge him to do what his immediate predecessor, now the emir of Kano did in 2013 when he cancelled the operating licence of 20 BDCs including FBN BDC for the round-tripping of foreign exchange,” he said.
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18 Comments
GOVERNOR GODWIN EMEFIELE HAS LOST HIS BEARING ON THE PROPER POLICIES AND MANAGEMENT OF FOREX, CHANGING FOREX POLICIES EVERYDAY REDUCING THE CBN TO A BANANA REPUBLIC WITH THE CBN GOVERNOR HOLDING NEVER ENDING BANANAS IN HIS HAND. THIS NOVICE AND ECONOMICALLY ILLITERATE GOVERNOR HAS LOST AL HIS LEGITIMACY ON THE FOREX OPERATIONS OF THE BANK RESULTING IN LOSS OF CONFIDENCE BY THE FINANCIAL ORGANISATIONS, PRIVATE AND PUBLIC SECTOR. HOPEFULLY WHEN MR EMEFIELE PRESENTS HIMSELF BEFORE THE SENATE AND HOUSE OF REPRESENTATIVE, THIS WEEK TUESDAY, THEY WILL RECOMMEND HIS IMMEDIATE SACK AS THE GOVERNOR OF CENTRAL BANK FOR REDUCING THE VALUE OF NAIRA TO ALMOST ZERO.
EMEFIELE HAS AMPLY DEMONSTRATED THAT HE IS A COMPLETE NOVICE AND FAILED NIGERIA IN THE PROPER IMPLEMENTATION OF FOREX POLICIES WHICH WILL MAKE NAIRA A STRONG CURRENCY. HIS CONTINUED STAY AT THE CBN IS A COMPLETE DISASTER FOR NAIRA.
This is what happens when a CBN GOVERNOR takes orders from a brainless illiterate certificate forger in Aso rock. We’ll keep watching. It appears the exchange rate may hit 500Naira to $1 by end of 2016.
no, my friend, just watch, it is going to be 1000 naira per dollar very soon.
this daura deadwood duffer, buhari, is not worried about it so long as this tourist president buhari gets his own ESTA CODE FOR USELESS FOREIGN TRIPS AT AN OFFICIAL EXCHANGE RATE OF N199.00 PER DOLLAR.
this worthless daura fool has just fudged in the presidential chair at aso rock and is doing nothing for the nation except to tell us daily stories on war against corruption as if that is his only task and as if the poor masses and old age poor pensioners of nigeria are going to fill their stomachs with such fake stories. this cold-blooded, deadwood, daura duffer, has deceived nigerians with his false pre-election promises.
buhari is proving to be both a traitor and an economic saboteur through his baseless forex and economic policies in the country reducing naira to zero value. under buhari, naira is finished; far away from his stupid pre- election gimmick promise that he will make one naira equal to one dollar.
buhari is both a lair and a traitor deserving to be shot by military firing squad using an anti-aircraft gun, as was done in north korea.
This is what happens when a brainless leader with a fake PHD appoints his incompetent tribal person from the same zone to a position he never deserves.
We don’t have the dollars, so the market should be deregulated. Demand and supply. There should never be two different exchange rates in the same country. Everyone should go to the same market.
absolutely correct.
It appears that finally the CBN has decided to deregulate the exchange rate without saying so. If the commercial banks are to source the forex themselves, that means market price, regulated by supply and demand rather than the dictate of the CBN. If this is so, we are in for a period of confusion which will finally bring a real rate for the Naira, whatever it is. A devalued Naira will encourage local production and export, as well as foreign investment without which our country cannot develop.
But the message should be clear to all the parties involved!
It appears that finally the CBN has decided to deregulate the exchange rate without saying so. If the commercial banks are to source the forex themselves, that means market price, regulated by supply and demand rather than the dictate of the CBN. If this is so, we are in for a period of confusion which will finally bring a real rate for the Naira, whatever it is. A devalued Naira will encourage local production and export, as well as foreign investment without which our country cannot develop.
But the message should be clear to all the parties involved!
All of you critics don’t even know what you are talking about. This is a good development. Black market rates are high and will increase cost of doing business for illegal operators which is a good development. You should also start importing through the legal channel and reduce your cost of operations instead of looking at the black market.
The legal channel (the CBN interbank) has just been stopped. Now the commercial banks are to source forex from exporters, which will sell at whatever value they want/can: Hence, de facto devaluation, in my view.
You are right and that is the last loophole which is still open and needs to be closed. However, as a legal importer of approved list of goods, you can request for CBN $ and still get it albeit with some difficulty and facilitation which is still cheaper than the option of black market. To me, the autonomous market needs to be closed as well and the CBN needs to start ensuring that exporters are not undervaluing their cargo to divert the funds owned by Nigerians.
You say “you can request for CBN $ and still get it”. This is what the CBN has just stopped: They are saying that they are not going to fund the interbank anymore, leaving the commercial banks to source funds from wherever they can find them, i.e., exporters who are paid in forex and need the Naira equivalent in Nigeria.
I am referring to a formal import process with a Form M. You can still get $ for it. All this says is that banks cannot use one customers money to fund another an then ask CBN to cover their exposure. Form M will still be accepted and is the only means of accessing $. that has not changed and cannot change. If that happens then everything will come to a standstill
You can register your Form M, say as LC. When you need the forex you have to ask your commercial bank which cannot source the funds from the CBN (the major supplier of forex in the interbank market). It has to source them from exporters who are willing to sell (very few) who will ask for a “market” rate for their money, say N320/USD. That is a de-facto devaluation. But the CBN will not say so because that word is banned in their vocabulary.
I just finished paying 110,000 $ through LC bought at 199.7 N to a $. i don’t know what you are referring to. You don’t need to go to autonomous market for that. just need a good relationship manager in the bank.
Thank you for sharing. It is not clear to me what will happen. I reckon that if you try to register another form M as LC, the rate, after today’s announcement, the actual rate will no longer be N199.7 but something in the region of N300/USD, as the CBN say they are no longer going to intervene (significantly) in the interbank market.
I believe you are misinterpreting the news. if it would have been correct then there is no point in having an exchange rate of 199.7. I am 100% certain of what i am saying. You can still get $ from Form M although it is time consuming.
Thank you!
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