Deposit Money Banks in Nigeria are grappling with a shortage of dollars after the Central Bank of Nigeria (CBN) significantly reduced their foreign exchange allocations.
According to sources within multiple banks, they are facing challenges meeting customers’ demands for foreign exchange, especially for purposes such as school fees and Personal Travel Allowance
The gap between demand and supply has exacerbated, prompting concerns within the banking sector. “We are hoping the CBN will intervene and increase forex supply soon,” a senior official from a tier-1 bank told The PUNCH. Another bank official expressed frustration, saying, “For some weeks now, we have not received allocations. Sometimes they delay in providing it.”
Other banking sources confirmed that the CBN has indeed decreased the forex allocations to banks. On Monday, the CBN announced its plans to introduce measures to counter the depreciation of the Nigerian naira.
In an effort to stabilize the situation, the CBN’s intervention has already led to a positive response. The naira saw gains in the parallel market on Tuesday after the central bank expressed its intention to address the ongoing depreciation of the local currency.
Folashodun Shonubi, the Acting Governor of the CBN, stated that the parallel market’s volatility is driven not only by economic factors but also by speculative demand. Despite this, Bureau de Change Operators reported an improvement in the exchange rate. The naira, which had previously been exchanged at 956/$ on Monday, appreciated to 925/$ on Tuesday.
In the Investors & Exporters window, the naira started trading at 785.89/$, reaching a peak of 799.90/$ before closing at 774.77/$ on Tuesday; it had closed at 764.68/$ on Monday.
Dr. Sam Nzekwe, a former President of the Association of National Accountants of Nigeria, cautioned that the CBN’s intervention might be temporary and unsustainable. He emphasized the need to address underlying economic issues, noting the prevailing lack of confidence in the naira.
Recalling events from July 2021, it’s worth noting that the CBN stopped allocating dollars to Bureau De Change operators but continued to do so through Deposit Money Banks.
Amid these developments, it is reported that the Federal Government may take action against Bureau De Change operators. Sources suggest that the Economic and Financial Crimes Commission could target currency speculators whose activities contribute to the pressure on the local currency.
An anonymous source shared insight into the government’s perspective, stating, “The Federal Government is planning to clamp down on operators of Bureau De Change across the country. Although they are businessmen, they are also part of the problem due to the rate at which they greedily hike rates to make profits. The current rates are not market driven but speculative, and that is why the government said they would intervene.”
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