Naira slumped 30 per cent against the dollar yesterday as the Central Bank of Nigeria (CBN) flagged off the new flexible trading at the Interbank foreign exchange market.
Yesterday’s rate at the interbank was sharply weaker than the N197 peg maintained by the CBN for the past 16 months.
Bids submitted by banks prior to the auction ranged between 210-290 naira to the dollar.
Daily Sun findings showed that uncertainty and nervousness about foreign exchange liquidity led to very low demands for dollars among end-users, as not more than $1 million changed hands in the market mid-day.
This was as concerns over backlogs of unmet demands of about $10 billion as against the $4 billion, prompted the CBN to extend trading by 2 hours.
A source from the industry, however, told Daily Sun, that there were some correspondence banks that were yet to submit their returns to CBN for claims on the Letter of Credits, which are expected to further balloon the unmet obligations to about $10 billion.
But the apex bank held special auction on Monday to sell more to the 21 participating banks to reduce the backlog of hard currency orders, and injecting $530 million for spot trading at N281 to the dollar.
But in the parallel, currency dealers sold N345 to the dollar, up to 10 percent stronger than N355 on Friday on expectations that more forex liquidity on the interbank market would reduce demand on the street.
Responding to developments in the exchange market, an analysts with UBS Wealth Management, Jonas David, said, “they have the room for discretionary forex interventions, and we don’t know how active they are in the market today, so the next days will show where the real equilibrium is. We should not be surprised by further weakening.”
Meanwhile, the Association of Bureau De Change Operators of Nigeria (ABCON) has called on the Central Bank of Nigeria (CBN) to grant it one out of the Forex Primary Dealership (FXPD) licences to be issued by the regulator.
ABCON President, Alhaji Aminu Gwadabe, said the interbank rate was not too encouraging because of the uncertainty in the market trading.
Gwadabe, who disclosed the group’s position yesterday, said as a major and critical stakeholder in the forex business, it would be against standard business practice to exclude bureaux de change (BDC) operators from the workings of the new CBN forex policy.
The BDC demand came as the CBN appointed 15 commercial banks as primary forex dealers.
The dealers include: Stanbic IBTC Bank, Standard Chartered Bank, Citibank, Zenith, Access, UBA, Sterling Bank, FCMB.
Others include, Diamond, Wema, Ecobank, Fidelity and Guaranty Trust Bank.
The Ag. Director Corporate Communications, Mr. Isaac Okorafor, said last night that the CBN was happy that the objectives to clear the FX demand backlog, perform its role as strictly a market intervention participant; and re-launch a functioning and efficient inter-bank market, were being met.
He said that “the CBN, in line with its desire to promote a transparent, liquid and efficient market, and in order to engender market confidence and ensure credible price formation, intervened in the market through a special Secondary Market Intervention Sales (SMIS) addressing the issue of the FX demand backlog by clearing $4.02 billion through spot and forward sales. This served in no small way to stimulate price discovery, with the determination of a marginal rate of $/280.00 through the Special SMIS process.
“So, we can state to you categorically, that the FX demand backlog has now been cleared and behind us for good,” he added.
He further assured the market participants and the general public that the bank was resolutely committed to making the Nigerian FX market globally competitive, credible, transparent, liquid, and efficient. He lauded market participants that collaborated in their conduct to achieving these feats and looked forward to another successful and historic day on June 27, 2016, when the market launches its innovative hedging product, the Naira-settled OTC FX Futures. (Daily Sun)