In Lagos, BDCs were trading the naira at between N200 and N202 per one US dollar after the news of the circular became public. In Abuja the value hovered around N196 to N198 a dollar, sources at the market told Daily Trust.
In a circular released, the apex bank said the bank took the decision to curb speculative demand in the forex market and to protect the foreign reserve.
Both at the Retail Dutch Auction System (rDAS) and the interbank fund the dollar should henceforth be used strictly for funding of letters of credit, bills for collections and other invisible transaction, subject to appropriate documentation as provided by extant regulations.
“Consequently, rDAS and interbank funds should no longer be sold to BDCs and other authorised buyers. Meanwhile the weekly sale of forex to BDCs will be sustained by the CBN based on the liquidity needs of the market.” CBN said
In his reaction, the acting president of the BDCs operators, Aminu Gwadabe told Daily Trust that the implication of the new regulation of the CBN is that the BDCs will no longer source for dollar from the banks to meet the demand in the street market and they will only rely on the weekly sales which is not enough to meet the market demand.
He blamed the unprecedented drop of the naira against the dollar to the actions taken by the CBN and warned that if care is not taken before end of February, the price could hit N250/dollar.
The CBN also in the circular increased the foreign currency trading position for commercial banks to 0.5 percent of their capital base from 0.1 percent, in a move to shore up interbank dollar liquidity.
Liquidity conditions have deteriorated as the naira has slumped to record lows because dollar inflows from foreign investment and other sources have dried up.
The central bank is having to intervene and sell dollar into the market, but that is burning up its foreign reserves.
-Daily Trust
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