Naira May Rise as CBN Plans to Sanction Banks Hoarding Dollars

Hoarding of foreign exchange, round tripping by Deposit Money Banks (DMBs), have been identified as reasons for the free fall of naira.

However, the Central Bank of Nigeria (CBN), is about to probe and sanction DMBs that are currently sabotaging government’s effort to halt the free fall of the naira in a bid to strengthen the national currency, it has been learnt .

Some banks are speculating, purchasing from the Investors & Export window and selling for profit in parallel market, it was also gathered.

However, a CBN source also said that speculators are keeping piles of dollars with plans to trade for massive profits in future deals.

A Bureau De Change (BDC), operator who craved anonymity , confirmed that banks are hoarding dollar in other to make huge profit. He stated that hoarding was partly responsible for the unification of exchange markets not delivering successes as envisaged by the Federal Government. “Some banks are speculating, purchasing from I&E selling for profit in parallel market. So, artificial demands are driving up forex rates and that is working against the efforts of CBN to stem the slide of the Naira,” the operator said.

The source, however, disclosed that the CBN plan to address the issues of speculation comprehensively through heavy sanctions on defaulting banks and BDC operators.

“Government through the CBN, plans to probe bank hoarding and roundtripping with heavy sanctions awaiting defaulters. This is because the apex bank believed hoarders – banks and black parallel operators- are responsible for the artificial scarcity that is driving up forex rates. Government plans through the CBN, is to address the issues of speculation comprehensively and through heavy sanctions.

“The World Bank and the International Monetary Fund (IMF) had greenlighted the unification but insisted that more efforts are required for the full dividends to be delivered.

“That was why CBN ordered recently that banks shouldn’t use the gains from revaluation to pay dividends or meet operational expenses. Heavy sanctions may force defaulting banks to release forex,” the source said.

However, it was gathered that in the coming days, the naira will start appreciating against the dollar due to the removal of forex restrictions on 43 items by the CBN. Removing the restrictions, economists have said, would eliminate the need for importers of the banned products to go to the parallel market, reducing the pressure on the naira. “The hitherto FX restrictions had implications on inflation, causing the prices of affected goods to increase,” an analyst, Chukwudi Ikerefon, said .

Meanwhile, the Association of Bureau de Change Operators (ABCON) has directed its members across the country to stop buying dollars for more than N900 from Nigerians at the black market.

The move ABCON said would sanitise the parallel market and help the naira rebound from N1,200 to around N900 or N950 in the days ahead.

The Chief Executive Officer of AYA Modo Nigeria Limited, Abdullahi Yusuf, confirmed the plans to peg the dollar to naira exchange rate below N1,000 at the black market Moreover, the president of ABCON, Aminu Gwadabe, failed to confirm the directive, noting that ABCON as an association would comply with the CBN allowable limit of -2.5 per cent to +2.5 per cent of the Nigerian Foreign Exchange market window weighted average rate of the previous day.

“As usual, we believe that making the Naira stable requires the CBN to make our sector commercially viable by opening up other sources for our members to ensure business continuity.

ABCON and its members are Nigerians and will embrace any CBN policy aimed at ensuring naira stability and including BDCs as a third pillar for moderating and regulating the parallel market.”

“The CBN has issued us directives that we should only transact our business at their referenced anchor rates and advise our members to do the necessary,” he added.