The naira on Tuesday reacted negatively to the Central Bank of Nigeria’s (CBN) policy as it lost N1.50k or 0.82 percent against the US dollar at the inter-bank market, it was learnt.
The CBN, on Tuesday, said commercial banks could hold 0.1 percent of their shareholders’ funds in foreign currency, reversing a directive enforced last month to stop banks from dealing in hard currency on their account.
After trading on Tuesday, the local currency closed at N183.10k/$ as against N182.10k/$ the previous day at the inter-bank market, data from the Financial Market Dealers Quotations (FMDQ) revealed.
Naira has been gaining against the dollar since the resumption of foreign exchange auction at the Retail Dutch Auction System (RDAS) after the festive holidays by CBN.
A total of $240 million was sold at the RDAS on Monday after the CBN offered a total of $200 million to some deposit money banks at the rate of N168/$.
In a circular signed by Ahuchogu O.L. for director, trade and exchange department, CBN, banks are required to utilise funds purchase from the autonomous/inter-bank foreign exchange market within 72 hours from the value date, failing which such funds must be returned to the CBN for repurchase at the bank’s buying rate.
The move is intended to curb speculation in the naira, which has been hit hard in the past few months by falling oil prices.
“The market re-opened two-way quotes today (Tuesday) with the CBN allowing banks to hold some dollars against their position, (but) there was no liquidity,” one dealer told Reuters.
The CBN devalued the naira two months ago, and in December tightened trading rules to try to curb speculation against the currency, slowing trading to a trickle.
The devaluation of its target band by 8 percent to N160-N176 against the dollar was meant to halt the slide in foreign reserves. But the Naira has traded well outside that band, and reserves are still falling. (Reuters)