CBN Debits Banks N126Bn to Raise Currency Value

Central Bank of Nigeria (CBN) has debited N216bn from banks with excess cash holdings as part of measures to strengthen the naira.

Mr. Godwin Emefiele, CBN governor

Reuters reported  that the naira had come under intense pressure in recent months during the coronavirus pandemic.

A sharp fall in the price of oil – Nigeria’s main export – and departing foreign investors caused a large financing gap.

The currency had been hitting new lows on the over-the-counter spot and black markets since March after the central bank adjusted its official rate, implying a 15 per cent devaluation to absorb the impact of an oil price crash.

On Friday, the dollar exchange to the naira at N455/$ at the parallel market.

The naira traded at N385 on the official market last week, weaker than a quoted rate of 361 backed by the central bank.

Banking sources said the liquidity withdrawal came before a foreign currency auction on Friday.

“The Central Bank is trying to manage the FX rate using the cash reserve ratio,” one banker said, adding that the debits had become frequent and over the 27.5 per cent limit.

He said offshore lenders were the most affected on the levies since they did not operate retail business and were debited from their corporate deposits or borrowings.

The bank was selling forex to importers and individuals with dollar expenses to keep the economy afloat, but it was yet to resume forex sales to investors that had sold assets and needed to leave the country.