CBN Ban On Nine Banks Puts Pressure On Forex Market

The decision of the Central Bank of Nigeria (CBN) to ban nine Nigerian banks from foreign exchange market has put pressure on the market forcing the US$ to trade above N402 in the parallel black market on Wednesday, 24 August.
Sources say the pressure on the black was as result of anticipation of increased demand for dollars because of the absence of the nine banks and their customers from the official market.
According to a Reuters report only three deals worth $0.75 million were traded at 305.50 per dollar in the inter-bank market on Wednesday with no trades taking place until in the afternoon when CBN intervened. CBN has been forced to intervene in the market since floating the naira in a bid to boost liquidity.
The CBN was engaged with intense discussions with the Chief Executives of the affected banks for most of Wednesday. The suspensions from the interbank market were imposed after the banks failed to remit $2.1 billion, the government’s share of dividends belonging to the NNPC.
They were due to pay the funds into the government account at the central bank.
The affected banks are the United Bank for Africa (UBA) Plc – $530 million, First Bank of Nigeria (FBN) Ltd. – $469 million, Diamond Bank Plc – $287 million, Sterling Bank Plc – $269 million, Skye Bank Plc -$221 million, Fidelity Bank Plc – $209 million, Keystone Bank Ltd. – $139 million, First City Monument Bank (FCMB) Ltd. – $125 million, and Heritage Bank Limited – $85.5 million.
However, UBA was readmitted into the inter-bank market on Wednesday evening after remitting the required funds to the CBN, according to a statement from the bank.
Most of the affected banks claim that the delay in remitting the funds was due to poor dollar liquidity in the market. Foreign investors have largely remained on the sidelines despite the decision of the CBN to float the naira in a bid to attract them into the market.
CBN’s continuous tinkering with the naira float as well as lack of policy clarity from the federal government has dampened investor confidence.