Indications emerged last week that commercial lenders scrambled for cash to pay for bond purchases and cover their positions, as well as fulfil cash demand obligations from over 3,000 Bureaux De Change (BDC) operators whose accounts for dollar purchases must be funded.
The Central Bank of Nigeria (CBN) last week increased weekly dollar sale to BDC operators by 100 per cent to $40,000 per week per BDC effective from this week from $20,000 per week. Hence, the operators were required to fund their accounts on Thursday in order to get dollar value on after the Easter holiday on Tuesday.
Similarly, the Debt Management Office (DMO) raised N105.32 billion from bond sales last week, and payment for the debt sale was due on Thursday, draining liquidity in the market and pushing further up the cost of money in the market.
“The market is currently short of funds with major placers asking for a higher rate on their money as a result of pressure from those who need cash to cover their positions,” one trader said.
The central bank has consistently sold dollars at both the spot and forward markets, and required banks to pay for the purchase. This drained liquidity in the market. The apex bank also disclosed that demand for dollars by banks fell by 65 per cent during its last foreign exchange auction.
Confirming the decline in dollar demand by banks, Acting Director, Corporate Communications Department, CBN, Mr Isaac Okoroafor said that the banks were only able to pick $45 million out of the $100 million offered by the CBN on wholesale spot. He said the major injections made by the Bank in the course of the week were aimed at providing access to all stakeholders with legitimate need for forex.
“The CBN remains upbeat that the forex market will remain liquid and that Nigerians who genuinely require the forex will get ample access to the currency,” Okorafor noted.
It will be recalled that the CBN made special interventions in the Bureau de Change Segment of the forex market and capped up an eventful period with the opening of a new window for Small and Medium Enterprises (SMEs). These special interventions are in addition to over $500 million dollars offered to dealers in the wholesale and retail segments in the past week.
Okorafor had disclosed that the new window for SMEs provides small scale importers an avenue to source forex to boost their respective business through the importation of eligible finished and semi-finished items at not more than $20,000 per quarter per enterprise.