Nigeria’s economy may grind to a halt in coming weeks unless the Central Bank (CBN) moves to relax rules that have curbed Foreign Currency (FX) trading and liquidity in Africa’s largest economy.

Banks have been unable to open letters of credit for their clients, resulting in an increasing backlog of unmet dollar demand by Nigerian firms, even as supply of dollars into the interbank market falls.

“Manufacturers are unable to fund FX for raw materials and banks are scrambling for dollars overseas as credit lines dry up. Things are at a standstill,” Stephen Onasanya, Group Managing Director and CEO of First Bank Plc, Nigeria’s largest lender by assets, said at a Bloomberg conference at the Nigerian Stock Exchange (NSE) yesterday in Lagos.

“The CBN cannot support the naira at these levels,” Onasanya said.

Nigeria’s Central Bank recently banned importers from using the interbank foreign-exchange market for some goods and enforced trading restrictions to stabilise the naira that weakened 14 percent against the dollar in 2014.

The measures have led to a near collapse in trading in the interbank FX market and a CBN that is increasingly being seen by investors as driven by fear” of further devaluation, as opposed to a rational exchange rate policy.

“There were 14 pronouncements by the CBN on FX alone between November 2014 and February 2015. The CBN seems to be working in a silo without any clear FX policy,” Kyari Bukar, MD/CEO of the Central Securities Clearing System (CSCS) said.

The CBN is struggling with meeting demand for dollars due to the 40 percent fall in crude oil prices to below $65 a barrel in the past year and because Nigeria gets up to 90 percent of dollar earnings from crude oil sales.

The Central Bank’s Gross dollar reserves fell to $29 billion on June 24, down 15 percent from the $34.49 billion it was at the beginning of 2015.

The backlog of unmet dollar demand is “substantial” according to Peter Amangbo, Group Managing Director and CEO of Zenith Bank.

“There is a need to clear that backlog and start at a zero base. We now have a case of panic in the market,” Amangbo said at the same conference.

“A decicion has to be made soon, and we believe that the size of the FX backlog can be managed, with the easing of the interbank trading restrictions coming afterwards.”

The Central Bank is however resisting a further devaluation of the national currency.

CBN Governor, Godwin Emefiele, at a meeting with treasurers and members of the Financial Markets Dealers Associationlast week, outlined concerns that that removing naira trading curbs may cause dollar demand to surge and the naira to enter a freefall, sources present at the meeting told BusinessDay.

The CBN instead renewed foreign exchange controls this week by stopping Nigerians from using the interbank FX market to access dollars for 40 categories of goods, ranging from private jets to rice, Eurobonds and foreign shares.

The dollar shortage and lack of clarity on fuel subsidy payments may lead to a return of fuel shortages soon, said Austin Avuru, CEO of upstream Nigerian oil firm Seplat.

“In three weeks the scarcity of petroleum products will resume, as very little importation is being done at the moment,” said Avuru.

“The current respite is being caused by some people who owe the government, that are bringing in shiploads of products.”

JPMorgan Chase & Co. said it may cut Nigeria from its emerging market bond indexes, tracked by more than $200 billion of funds, because of the currency restrictions, which it said may make it more difficult for investors to track the gauges.

The New York-based lender will make a decision by the end of the year, it said on June 5.

“There is very little the CBN Governor can do in isolation and must partner with other arms of government to avoid a run-away value of the naira,” said Femi Olaloku, Executive Director, Treasury at UBA said.

“The current measures are not working.”

http://businessdayonline.com/2015/06/banks-say-cbn-choking-economy-with-fx-restrictions/#.VY0MORtViko Cc: Ishilove, lalasticlala

what is CBN

Change has come. Embrace it and make adjustments.

CBN complicating Nigeria's lives since 1900BC

Luedave:
what is CBN

Like seriously?

Anyway, Central Bank of Nigeria...

Man I'm sick of this country already. They never get anything right.

Nigeria don wowo sote e dey give me headache# President Buhari

if you ask me who i go ask

ve actually been thinking alone that line too,
the restriction will have adverse effect on the economy

I belive soon enough things will get better

Too many sad tales on the write up.. Our economy is really so shaky now...

Naira may be devalued further eventually. ..

so you feel it is choking the market wait till our reserve are completely eroded then you would know that CBN is just doing us all a great service.

Luedave:
what is CBN

Ode

Banks Say CBN Choking Economy With FX Restrictions

http://www.nairausd.com/2015/06/banks-say-cbn-choking-economy-with-fx.html

DICKtator:

..

OBJ...write another book na..... WATCH 2 .........see our economy, fight everywhr

Kufie:
Man I'm sick of this country already. They never get anything right.

Nigeria is a sad situation. . . . . .

Bluetooth2:


Ode

Don't call him that just because he asked a question. we must not know it all

It's very unfortunate people don't understand policies and nobody is educating the masses.

The restrictions on FX is because of falling value of Naira.

1. The policy discourages importation/capital flight , hence enteprenuers are supposed to seek alternatives like producing these items and exporting them.
This way the value of naira will increase

2. Also those exporting raw materials should add value to it which will in turn add value to naira
Eg raw materials like cashew, cassAva, timber solid minerals etc that we export should be added value and turned into a finished product. instead of importing these finished products.

3. The banks are at fault, they refuse to give loans to SME's because they want high interest. This will encourage manufacturing industries hence the value of naira would rise. They rather give the loans to big ogas most of them are into importation busineses(capital flight) hence the value of naira will keep falling.

4. Nigeria have depended for so long on Fx from crude oil, and not reinvesting in other sectors. Time to diversify. #Solid minerals and Agriculture is the future

As long as we keep importing, the value of naira will continue to drop.
Thank God they are planning to place bans on more items

Come on we running out of believe oh!

I still believe in Nigeria, but everthing sickens me to my very core!

This is crazy!

Nigeria economy is about to crumble and some pple who call themselves leaders are busy fighting over positions. SMH

If this happens in USA, the congress would have started a powerful discussion that will resolve the issue. It is unfortunate that those elected as senators do not even understand the basics of exchange rate volatility and instead of them to start discussing the issue by inviting experts and analysts, they are busy fighting and seeking opportunities to loot the remnant of the treasury.

APC is a joke!

I really do not know why uzo200 rated http://www.touchpapyrus.com as the worse blog ever, is it all because of the traffic?

abeg, i need weed!

Buhari's government have started on a very wrong note. They are getting it wrong on all sides.... maybe we should have insisted in sighting that WAEC certificate.

So many disjointed policies..... You lift the ban on furniture and textile thereby discouraging the local industry and two days after the ban rice, margarine cement importers from obtaining FX from banks under the guise of encouraging local industry.

Why take such step at a time your naira is struggling knowing fully well that these guys would dive into the parallel market causing some scarcity and driving up parallel prices?.... why not increase the import duties on these products instead to discourage import and encourage local production? why stifle an already struggling FX environment.

Absolutely silly decisions by Buhari and his co-travellers

Where are does senseless fools that would say it is Buhari's fault.

ammyluv2002:
Don't call him that just because he asked a question. we must not know it all

its an iodiotic question cos he simply wanted to book first to comment

ideologies:
It's very unfortunate people don't understand policies and nobody is educating the masses.

The restrictions on FX is because of falling value of Naira.
The policy discourages importation/capital flight , hence enteprenuers are supposed to seek alternatives like producing these items and exporting them.
This way the value of naira will increase

The banks are after their interest alone.

plendil:


its an iodiotic question cos he simply wanted to book first to comment

It's not okay to insult people.