Naira firms as CBN directs banks to pay for dollar purchase 48hrs ahead

The naira on Thursday firmed further at the Bureau De Change and parallel market segments as the Central Bank of Nigeria (CBN) intervened by supplying dollar to the BDCs.

Meanwhile, the apex bank has directed commercial banks to pay for their dollar purchases 48 hours in advance, after banning them from accepting foreign currency cash deposits to curb dollar demand and stem illicit financial flows.

Consequently, naira gained N2 or 0.90 percent each against the US dollar at the BDC segment and parallel market.

As a result, the local currency closed at N218/$ compared with N220/$ at the BDC segment of the foreign exchange, while closing at N220/$ against N222/$ at the parallel market.

However, naira weakened against the dollar by N0.16k/$ or 0.08 percent to N198.26k/$ on Thursday from N198.42k/$ the previous day at the inter-bank foreign exchange market, according to data obtained from Financial Markets Dealers Quotations (FMDQ).

BusinessDay gathered that the CBN supplied two weeks dollar in one week to BDCs, which will bring down the price of dollar and curb speculation.

Andrew Elueni, managing director/CEO, Flawless Capital Limited, told BusinessDay that the CBN supplied dollar to some BDC operators on Thursday after supplying other BDCs on Wednesday. The CBN will supply additional $30,000 to BDCs today.

Dealers told Reuters that banks would struggle to buy the US currency on behalf of customers, while the ban on dollar cash deposits would stem speculation.

The CBN in June curbed access to the inter-bank currency market to preserve its foreign reserves, and this led to the diversion of dollar demand to the black market, weakening the local currency.

At the money market, the overnight lending rate on Thursday jumped to 50 percent from 12 percent the previous day, amid low liquidity as some banks scrambled to stock up on the naira to back up their forex demand with the central bank.