CBN Issues Directive To Commercial Banks To Stop Speculation

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Mr Godwin Emefiele, CBN Governor.
Mr Godwin Emefiele, CBN Governor.

The Central Bank of Nigeria (CBN) has issued a directive to 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.

Dealers said banks would struggle to buy the US currency on behalf of customers, while the ban on dollar cash deposits would stem speculation.
The central bank in June curbed access to the interbank currency market to preserve its foreign reserves. The move led to the diversion of dollar demand to the black market, weakening the local currency.

“We are now required to deposit the naira equivalent of our total forex bids to the central bank 48 hours in advance before its intervention,” a dealer told Reuters.

The central bank was not immediately available to comment. The measures led to a sharp increase in interest rates on the interbank market, traders said.
“The new measure has taken out some huge naira liquidity in the market and putting pressure on the cost of funds among banks,” one dealer said.
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