The naira continued its upswing at the parallel arm of Nigeria’s foreign exchange market as it closed at N209 to $1 on Monday evening as banks continue to reject dollar deposits in customers’ domiciliary accounts.
The current black market rate is a significant improvement compared with the N225 to a dollar the currency went for as at Friday.
The development has resulted in excess dollar supply in the market, a situation that has left currency speculators and some BDC operators confused.
“We don’t know what is happening in the market and nobody knows where it is headed to,” Mallam Shittu, a BDC operator in Marina, Lagos, said.
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Banks in the country have temporarily stopped accepting payment of dollar cash by customers into their domiciliary accounts as they move to avoid currency risk.
Godwin Emefiele, CBN governor, said in an interview with THISDAY on Monday that the decision to suspend payment into domiciliary accounts was in order.
Emefiele had explained that the decision by the banks to stop collecting foreign currencies into their vaults was not taken by the CBN, but that the central bank was in support of the idea.
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“You cannot go to the United States where the dollar is spent and try to pay pound sterling into an account, because you will be arrested. Neither can you go into the United States and carry Euros into that economy and tell them to pay it into an account for you; you will be arrested. The same way you cannot go to the United Kingdom where pound sterling is their unit of currency and then you carry dollars or Chinese Renminbi and try to pay into an account, because you will be arrested.
“So when you look at why the banks took the decision, the banks decided to take that line of action because they felt that the level of foreign currency that had in their vaults was above the optimum level that they could manage,” he had explained.
The naira had fallen to about N243 to a dollar in July, as a result of the Central Bank of Nigeria’s restriction of the funding of 41 items, including toothpicks in the official market.
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12 comments
How competent is Emefiele?
It took the banks and not CBN to take this decisive action.
What was Emefiele ‘ s role in handling oil money for Diezani as Zenith Bank CEO? Was there any link?
@Babazanna: Gerrarahere naysayer
The appetite hasn’t fallen – more like we’re being forced to reduce our appetite through unsavoury measures.
The pdp has brazenly described this monetary breakthrough as a communist economic agenda.The party’s appetite for Dollar is irreversibly unpatriotic.Nigerians are wiser now.
This is the most correct common sense decision by the CBN. This decision was taken by the central bank, but it has to be made to look like it was the banks because of the existing law that allows Nigerians to own and operate domiciliary accounts. Emiefele said it all in his explanation. The so called round tripping has now been brought to an end.
Naira will go back to around N120 or so per dollar, if not higher. No Nigerian should be allowed to store his idle cash balances in foreign currency inside Nigeria. No other country does it. Just check it. It doesn’t make any sense, whether economic, political or other. It can only transfer foreign reserves from the government to individuals, thus bring unnecessary downward pressure on the local currency. It ought to be illegal, but for the 1995 law that created domiciliary accounts. The law should be abrogated.
Congrats Emefiele; congrats GMM; congrats ordinary Nigerians!!
Helloooo.
That is a simpleton way of looking at issues. Yes, allowing foreign currency deposit may be wrong, but that is definitely not what determines the value of a currency. Rather, it’s our ability to earn foreign currency as a nation. It only means that the CBN will almost deplete our foreign reserves in trying to defend the artificial value of Naira. Already, banks are finding it difficult to get alternative sources of USD! As exemplified by their inability to fund mastercard spending. The stock market is crashing as extra funds are no longer coming in. Yes, it is good to be patriotic, but being emotional in taking business decisions will only lead to disaster! Investigate how much came in to the country as FYI in previous years and compare to what is happening now!
Thank God.
By the grace of God before the end of the year it will be 1 to 1 as declared by the President. After all the Bible says where the word of a king is, there is power. It can just work for us. Only believe!
Salam! It is taking the right economic decisions as a nation that will grow our economy not prayers only! If u fast and pray for a million years without taking the right decisions, my brother. , you are courting failure. Just like CBN is doing! CBN is using up all our foreign reserves to defend the Naira! More dollars is going out and fewer is coming in! Please find out how much went out in the last few months, and how much we earned! No foreign investors will bring in his funds if the value is not right! Businesses are moving out! Foreign Direct Investment is drying up! Banks are finding it difficult to get alternative sources of foreign currency. Rather it’s only CBN that is desperately defending Naira at all cost! I assure you that it will only lead to official devaluation in the nearest future!
My brother, if you have free funds, I advice you to buy as much USD as u can lay your hands on.
You can not by fiat determine the value of your currency. It is a function of demand and supply. Period.
Thanks
I don’t understand that explanation of being arrested if you try to pay USD into your account in Europe. Is the Gov saying it is a criminal offence?
Domiciliary accounts are denominated in the various currencies. Euro account for Euro, Dollar account for Dollar. Is the CBN saying I have to keep my $ cash at home?
If this is a good development, how come the CBN exchange rate has refused to fall and the BDC rates seem to be crashing. Let CBN make the rate go down and see if we will not all chase after the Dollar.
Congratulations to CBN. The decision to stop dollar lodgement into Nigerian banks is welcomed decision. All the examples given by the CBN governor are correct. The CBN should block all the loopholes of capital flights and be very watchful of the banks’ activities because they cannot be trusted. Once again big congratulations.
I think this development is laudable!
All I can see is ‘pseudo’ economic from the CBN:
CBN decision to stop finanacing the recently listed 40 items including toothpicks is correct.
However, the decision of the banks to stop accepting the Deposits of Dollars and other foreign currencies is not only against the laws guiding banking in Nigeria, they are counter productive and just a bubble that would soon feezle out as it can simply not be sustained.
In today’s economy, you can not ‘force’ a reduction in the exchange rate of the Naira against under currencies.
We have to put the country back to work, being productive and exporting goods and services to other countries to earn enough forex. That in turn will help appreciate the Naira against other currencies.
The present measures to ‘force’ the appreciation of the Naira is not natural and would be counter productive as it bleed untold unemployment.
It is at best pseudo’economics!