The Central Bank of Nigeria (CBN) has officially devalued it again as the Nigerian currency will now be traded at the rate of N198 to one US dollar.
This came after the closure of the Retail Dutch Auction System (RDAS) and Wholesale Dutch Auction System (WDAS) foreign exchange windows, failed to halt its slide.
In a message posted on its website yesterday, the apex bank raised the naira/US dollar official exchange rate from N168/$1 to N199/$1 even as the Senate yesterday predicated the 2015 budget on an exchange rate of N190 to the dollar.
Meanwhile, the foreign market continues to thread softly, as customers show unwillingness to buy at the prevailing high rate.
The naira exchanged at N222/$1 to slightly weaken the position on Monday by 1 per cent when it traded for N219.80/$1.
In recent times, CBN has decided to bar commercial banks from holding any part of their funds in US dollars at the close of each business day as it stepped up efforts to reduce pressure on the naira.
It had to review the policy twice later, pegging the exposure at 0.1 per cent and after much persuasion, went ahead to move the limit to 0.5 per cent.
The CBN, in November last year, devalued the naira as it moved the midpoint of the official window of the foreign exchange market from N155 to N168 to one US dollar, which forced it to exchange between N168 and N174 to the dollar at the foreign exchange market.
The explanation given was that official devaluation of the naira became inevitable as a result of reduction in government revenue from oil production and sales. The development was expected to increase the volume of naira available to the Federation Account and to various levels of government to prosecute their local programmes.
But in its bid to calm the raging volatility observed in the forex market, as well as save the naira from further depreciation, the CBN increased the weekly supply of dollars to Bureau de Change (BDC) operators from $15,000 to $30,000 per operator.
The banking sector regulator said the move was also part of measures to deepen the BDCs segment. The latest policy took effect from Wednesday, January 28, 2015 auction.
J.P. Morgan analysts had placed Nigeria on a negative watch for the next three to five months following reservations over the country’s foreign exchange position and the bond market, which was described as illiquid.
Not ready to give up on its rescue mission, the CBN, which realised that domiciliary transactions are used for round tripping by banks, directed that banks submit details of domiciliary account holders, including name, account number and balances as at January 29, 2015.
The banks were also required to present total balance of all domiciliary accounts as at the same date, list of corporate domiciliary account holders and their balances, list of individual domiciliary account holders and their balances, list of public sector institutions domiciliary account holders and their balances as well as the mode of lodgement to the account transactions (either cash or by wire transfer).