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CBN mopped up N122bn from banks before devaluing Naira at retail forex auction

ECONOMY: The road ahead is rough, really rough, Emefiele tells Senate

The Central Bank of Nigeria (CBN) amassed N122 billion from lenders in a move to tighten money supply in its latest round of mopping up excess circulated money before Friday’s retail forex auction, bankers told Reuters on Monday.

Nigeria runs a multiple foreign-exchange rates regime which was operated to control demand for dollar following the global oil crash.

The regulator on Friday requested banks to bid for dollars at the rate of N380, 5.3 per cent higher than the N360 official rate.

Meanwhile, Naira opened lower at N387 to the dollar at the Nigerian Autonomous Foreign Exchange Rate spot market, also known by Investors and Exporters window.

It fell further on Monday to N462 at the parallel market.

The local currency has been strained lately amidst the coronavirus crisis and a plummet in the price of crude, which accounts for roughly 90 per cent of Nigeria’s foreign exchange earnings, coupled with the departure of many international investors, leaving the country with a yawning financing gap.

READ ALSO: CBN levies banks N216bn for Cash Reserve Ratio compliance

The collapse in oil price has triggered a dollar crunch for official markets, causing investors to seek hard comfort at the black market, where naira is significantly weaker.

There have been moves to converge rates around that offered by the Investors and Exporters window as the International Monetary Fund advised, finding support from analysts who believe it will help the economy.

But central bank’s chief Godwin Emefiele has said he would not harmonise rates close to the black market’s own because speculators’ activities are upsetting the foreign exchange system’s balance.

Acording to bankers, CBN has been soaking up the liquidity from the system prior to forex auction rounds to shore up Naira and check speculation.

The World Bank is expected to grant Nigeria’s prayer for a $3 billion lifeline to support its budget.

Ronald Adamolekun

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Ronald Adamolekun

Ronald Adamolekun is a creative writer with a mixed bag of experience in fields as diverse as data journalism, financial reporting and editing.

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