Nigerian National Petroleum Corporation (NNPC) has withdrawn $1.2 billion (N240 billion) from banks, triggering more dollar liquidity squeeze in the money market and causing the value of the naira to depreciate further at the parallel market, according to New Telegraph.

The NNPC reportedly wrote to the lenders last Tuesday, intimating them of its intention to transfer its domiciliary accounts to the Central Bank of Nigeria (CBN).

A top NNPC official, who pleaded anonymity, confirmed the withdrawal yesterday. He said the decision to move the accounts to the CBN stemmed from the ongoing probe of the corporation, stressing that it was to harmonise all “their accounts.”

A CBN official, who also asked not to be named because he has no clearance to speak on the issue, corroborated the NNPC official’s statement.

He said the NNPC’s directive to transfer its funds to the Central Bank was in order given the fact that the CBN is a banker to the government and that the oil corporation is also an institution of the government.

He, however, said the funds would boost the CBN’s reserves and improve its ability to stabilise the naira, which has received severe bashing at the parallel market, where forex end users that do not need documentation source for their dollars.

Besides, he said the decision to move the NNPC accounts to the CBN might not be unconnected with the ongoing probe of the oil swap deal and NNPC.

But the withdrawal of the funds has continued to jolt the money market, as banks, which had already created assets with the dollars, were said to be running helter-skelter to restructure the mis-matches that had been created with the NNPC funds.

According to New Telegraph, a  treasurer in one of the tier-one banks said lenders may have to start calling back their dollar loans extended to customers.

“This is a serious problem for us because the CBN has not been selling dollars to banks and we have used the dollars being recalled by NNPC to pay for trade obligations to customers offshore,” said another senior treasurer of a tier-two bank.

Renaissance Capital, a leading investment banking firm originating from Russia that operates in high-opportunity emerging and frontier markets, few days ago, put the shortfall in the forex market, which the apex bank had not been able to meet at $4 billion.

This has exerted enormous pressure on the parallel market, where N243 exchanged for a dollar yesterday. The official exchange rate, however, remained stable at N196.95 per dollar.

Since June 24 when the markets started reacting to the CBN’s latest policy to restrict access to foreign exchange for certain categories of importers, the naira has declined against the dollar almost on a daily basis.

Although most analysts are predicting another devaluation to around N210, Non-Deliverable Forwards – currency derivatives traded offshore – pointed to it being priced at around N255-N261 to $1 before the end of the year.

Just last week, the release of part of the N400 billion funds approved by the Federal Government to clear the backlog of salaries in states and local governments had further worsened the fortunes of the ailing naira.

Aminu Gwadabe, president, Association of Bureau De Change Operators of Nigeria (ABCON), said the demand for dollars had surged as individuals rushed to convert their naira to dollars.

He said: “There is a lot of demand with the recent injection of cash by the government. Part of the funds is being converted to dollars.”

Similarly, another BDC operator, who asked not to be named, said, “The scarcity is really serious; there is no dollar anywhere. So, people who have the money are buying available dollars with a view to later selling at a higher rate.” As at April, the CBN had spent $4.7 billion in defending the naira. Last February alone, it used at least $3.4 billion in fixing the exchange rate.

Nigeria’s reserves, according to the latest data on the banking watchdog’s website, is $29.95billion as at last Monday, which is totally at variance with the $31.89 billion announced by the CBN Governor, Mr. Godwin Emefiele, last week during his meeting with the Senate.

Some critical stakeholders in the economy, including the Managing Director of Financial Derivatives Limited, Bismarck Rewane, had stressed the need for a further devaluation of the naira.

For instance, Mr. Bisi Onasanya, Managing Director and Chief Executive Officer of First Bank of Nigeria Limited, , contended that the CBN needed to let the naira devalue because the foreign- exchange trading restrictions had started to harm growth in the economy.

“People just don’t believe the CBN has what it takes to sustain the exchange rate at the present level.

The market needs to reopen. You cannot peg the naira at a level that the whole world knows is unrealistic.

“We are in a situation where Nigerian banks are shopping for foreign exchange in the international market. We need to bite the bullet and move on, or there will be repercussions over the long term,” he said.

But reacting to the steady decline in the value of the naira on the parallel market last Thursday, Mr. Ibrahim Mu’azu, CBN’s Director, Corporate Communications, stated that the apex bank would not be distracted by the development and would not take it into consideration in determining the exchange rate.

He said the volume of trading in foreign exchange taking place in the market was so marginal that it should not be used to determine the naira’s rate.

New Telegraph had reported last week that the banking watchdog had begun probing banks to ascertain those that have complied with its directive on the transfer of public sector revenue accounts to the CBN account.

The investigation followed the expiration of the June 30, 2015 deadline that the banking watchdog set for the exercise.