Returns N338bn for unsuccessful forex bids
In a bid to mop up liquidity and prevent speculation in the foreign exchange market, the Central Bank of Nigeria (CBN) on Friday deducted N216 billion from banks accounts as Cash Reserve Ratio (CRR) .
In addition, the apex bank mopped up N80 billion through sale of secondary market (Open Market Operations, OBB) treasury bills.
These developments prompted the cost of funds to rise sharply on Friday with interest rate on Collateralised (Open Buy Back, OBB) lending rising by 740 basis points (bpts) to 15.17 percent from 8.3 percent the previous week. Similarly, interest rate on Overnight lending rose by 684 bpts to 16.67 percent on Friday from 9.83 percent the previous week.
In another development the apex bank returned N338 billion to bank customers for unsuccessful bids at its retail foreign exchange auction, a situation that indicates unwillingness to further use the nation’s declining external reserves to meet dollar demand from end-users.
Meanwhile, the external reserves declined for the second consecutive week, falling to $36.316 billion on Thursday last week from $36.446 billion on Thursday June 11th, 2020. This represents week-on-week decline of $130 million. Consequently the reserves had fallen by $256 million since May 29th, 2020 when it peaked at $36.594 billion.
Reflecting this development, the naira depreciated last week in the parallel market and in the Investors and Exporters (I&E) window.
In the parallel market the naira depreciated by N7.5 as the exchange rate rose to N455.5 per dollar on Friday from N448 per dollar the previous week.
In the I&E window, the naira depreciated by 75 kobo as the indicative exchange rate for the window rose to N386.5 per dollar from N385.75 per dollar the previous week.