The Central Bank of Nigeria (CBN) ended the week with a fresh dollar intervention at the interbank market worth $100 million, while banks were unable to pick them all. The development showed a surplus dollar position in the banks, particularly for the retail segment- personal business travel allowance, medical tourism and school fees, among others.
Specifically, while the banks had earlier made bids worth $91 million, CBN on its part offered $100 million and the lenders ended up picking $81.35 million, leaving about $18 million for the apex bank.
The Acting Director of Corporate Communications, CBN, Isaac Okorafor, attributed the inability of authorized dealers to pick up the entire offer of the CBN to increasing dollar supply and sense of apprehension among dealers who anticipate a further crash in the rate of the dollar.
Despite the development, analysts at Afrinvest Securities Limited, said the conditions are now right for CBN to open up the interbank market, considering the renewed interest to close long dollar positions by both individuals and corporates, through further adjustment in the interbank rate.They also pointed out that renewed pressure on oil prices despite subsisting oil production cut agreement is an important anchor for spot exchange rate speculations. “CBN remains the dominant player, indicating that the improvement in the balance of payments and aggressive interventions are yet to fully transmit into business and investment confidence,” they said.
But Okorafor reiterated the determination of the bank to sustain its current interventions in the market, adding that “those who doubt the capacity of the CBN to sustain the intervention in the foreign exchange market are beginning to have a change of mind”.
While the interbank rate close the week at N307/$, naira sustained gains at the parallel market to N378/$, widening the speculative losses and triggering further apprehension among speculators, who anticipate further losses given the continued crash of the dollar.
Meanwhile, the interbank lending rates- Open Buy Back and Overnight declined by 4.8 per cent and five per cent respectively when compared to previous week’s record, as they closed the week at 9.5 per cent and 10 per cent apiece.
Both rates had closed high mid-week at 43.3 per cent and 44.4 per cent respectively and remained at same level on Thursday, although they had traded at 100 per cent apiece on Tuesday, as liquidity withdrawals by the apex bank were executed.
CBN had floated another securities auction worth N2.3 billion and N63.8 billion in 206-day and 360-day tenors respectively at 18 per cent and 18.6 per cent respectively, alongside the sale of $180 million at the interbank foreign exchange market.
These interventions contracted the quantity of money in circulation and triggered a hike in lending rates among banks, as they jostle for available cash to settle their bids.