Naira crashes to new low of N465/ USD as CBN issued directives domiciliary accounts usage

As Naira came under fresh pressures in the parallel market Wednesday,
the Central Bank of Nigeria, CBN, issued more directives restricting
usage of domiciliary accounts by bank customers, apparently to stem the
pressures and improve official supply of foreign exchange to the
interbank market.
As a result of the pressure, Naira crashed to between N460 and N465/
USD1, against the opening rate of N445/USD1 in the parallel market
segment, though the interbank rate depreciated just marginally to
N312.9/ USD1, against N310 earlier in the week.
Currency dealers at both segments of the market attributed the
renewed pressure on rates to a worsening supply gap at all the segments,
even as CBN’s intervention, according to them, has become too thin to
assuage the huge demand.
One of the dealers in a commercial bank said: “CBN may have started
finding it difficult to intervene with significant supply of foreign
currency to the interbank market.
“On the other hand we have been having increased demand from our
customers but we are unable to source their requirements for some weeks
now.”
Against the backdrop of the huge supply and demand gap, CBN appeared
to have renewed its restriction measures on access and usage of
independent foreign exchange resources.
Yesterday, some bank customers said they had received messages from
their banks warning them to desist from using foreign exchange inflows
in their domiciliary accounts for trading purposes.
The directives, according to a source in a bank, came against the
emergence of a thriving currency trade by some individuals with their
domiciliary accounts.
An e-mail from one of the banks stated that CBN had mandated that all
customers of financial institutions were expected to utilize their
accounts within regulatory guidelines.
According to the e-mail, the guidelines stated: “All customers of
financial institutions are expected to only use their accounts for their
direct personal/company related transactions.
“No customer of any financial institution is permitted to engage in
any activity that could be perceived as international money remittance
service (IMTO) or bureau de change (BDC) activities without the express
approval of the CBN.
“Any customer who fails to adhere to these guidelines runs the risk
of being reported not only to the CBN but subsequently to the security
agencies.’’
The bank, in the same e-mail, encouraged customers to be mindful of
these directives when using their bank accounts, adding that it would
continue to provide updates regarding the proper use of domiciliary bank
accounts.
Some of the banks’ account officers who spoke to Vanguard believed
the apex bank would follow up this directive with more stringent control
of access and usage of domiciliary accounts.
Worried by these developments, a financial analyst at CardinalStone
Partners Limited, a Lagos-based investment house, Tiffany Adugwe, told
Vanguard that the primary cause of the adversities and pressures on
exchange rate was the increasing supply gaps.
She stated: “There is no liquidity yet in the foreign exchange market
and the situation is worsening. We need emergency borrowings, foreign
exchange inflows as soon as yesterday.
“The forex is not available at the interbank market and that is why
the demands are going into the parallel market and hence the rate there
is shooting up.”