In a bold move to save the Naira, government has embarked on some desperate actions aimed at strengthening the national currency. The naira has in the recent weeks steadily been on the decline hitting its all-time low both at the official market and the parallel market. This has fueled speculative buying with a lot of people rushing to the market to exchange their Naira for dollar for sale at a latter day.

One of such moves was the directive that all oil receipts by the NNPCL must now be deposited with the Central Bank of Nigeria. The government and the CBN are determined to block every loophole being explored to take undue advantage of a weakening Naira. The deposit banks and Bureau de Change are also been targeted with a number of measures targeted all in a bid to save the Naira.

There are conflicting reports for the sudden shut down of Bureau de Change in the Federal Capital Territory of Abuja. Several of them located in Wuse Area, Zone Four precisely have suddenly closed shops and the streets usually bubling with forex hawkers have been deserted.

While some blamed the action on a planned swoop on the unauthorized dealers in foreign exchange, others said it had to do with a directive from government for them to shut down, while some others said the shut down was as a result of scarcity of forex especially dollars.

“We have been asked to shut down operations as the dollar price keeps going up. We are trying to control the rate,” said a BDC operator. Twenty-four hours earlier, the BDC association’s Chairman, Abdulahi Dauran, announced (Wednesday) that its members will be shutting down operations to curb the unprecedented depreciation of the naira against the dollar.

He said that the closure of business would take effect from Thursday, February 1, 2024. It was gathered, however, that the shut down of the Bureau de Change businesses may have been ordered by the government in a bid to arrest the sliding rate of the Naira.

Signs that Nigerians are groaning in pains following the inability of the nation’s legal tender to deliver food on the tables of most Nigerians came to the fore when President Bola Ahmed Tinubu travelled to Lagos for Christmas holiday. Lagosians jeered at him and in agony by shouting :”ebi n pa wa o” – we are hungry.

Those whose only challenge is food are lucky. For those on medication or on admission in the hospitals, they are not only crying but wailing. Prices of medicals have gone off the roof. The story is the same with beverages whose prices change on per second bidding.

Even local food stuffs like gari, yam, plantain among others are far beyond the reach of average Nigerians who now have to device strategies on how to reduce transport fare.

A roadside economist trying to explain why prices of good and services are jumping and galloping beyond the reach of ordinary Nigerians had a scapegoat to blame – the dollar. In a lay man’s language, he said because petroleum products are imported and paid for in dollars, the manufacturing companies also depend on imported raw materials also paid for in dollar , every aspect of life has something to do with dollar which is now getting to strong while the naira is getting weaker and weaker that even the West African CFA Franc is now exchanging better than the naira.

The legislative arm of the government is equally worried. The Nigerian Senate, on Wednesday, summoned the Governor of Central Bank of Nigeria, Mr. Olayemi Cardoso, to appear before it on Tuesday next week to answer questions on the state of the economy and the naira’s fall in the forex market. The Senate through its Committee on Banking, Insurance and Other Financial Institutions, chaired by Senator Adetokunbo Abiru (APC Lagos East), met on Wednesday when the naira plummeted to over N1,500/dollar and resolved to summon the CBN governor on the way out.

Senator Abiru said :”We are all living witnesses of what is going on. Underlining the major issue of the economy is the way the inflation index has been and of course, it is a major concern to us. We have deliberated among ourselves. Critical issues were addressed and we believe that the next line of action is to summon the CBN governor on Tuesday at 3 O’clock to brief us properly on the state of the economy”, he stressed.

While the executive and legislative arm of government are having headache over the miserable state of the economy, the Central Bank of Nigeria (CBN) the organisation saddled with managing the nation’s economy is having serious migraines. The CBN released a circular on 30 January warning banks and FX dealers against reporting false exchange rates, among others. This came on the heels of the adjustment of the methodology used for the calculation of the nation’s official exchange rate by the FMDQ Exchange.

The review has pushed the Nigerian Autonomous Foreign Exchange Market rate (official exchange rate) from approximately N900/dollar to N1,480/dollar. The naira closed at 1,450/dollar at the parallel market on Tuesday.

On Wednesday,31 January, the apex bank in another circular signed by the Director, Trade and Exchange, CBN, Dr. Hassan Mahmud, and representative of the Director, Banking Supervision, CBN, Mrs. Rita Sike the CBN in the circular issued prudential requirements that banks must follow. A key focus of these requirements is the management of the Net Open Position (NOP).

The NOP measures the difference between a bank’s foreign currency assets (what it owns in foreign currencies) and its foreign currency liabilities (what it owes in foreign currencies).

The circular mandates that the NOP must not exceed 20 per cent short or 0 per cent long of the bank’s shareholders’ funds.

This calculation, the apex bank said, must be done using the Gross Aggregate Method, which provides a comprehensive view of the bank’s foreign currency exposure. Others are that :

* Deposit Money Banks to sell their excess dollar stock latest February 1, 2024.

*warned lenders against hoarding excess foreign currencies for profit.
banks must calculate their daily and monthly NOP and Foreign Currency Trading Position (FCT) using specific templates provided by the CBN.

* Directed banks to maintain adequate stocks of high-quality liquid foreign assets, such as cash and government securities, in each significant currency.

*All banks are required to adopt adequate treasury and risk management systems to provide oversight of all foreign exchange exposures and ensure accurate reporting on a timely basis.

*Banks are expected to bring all their exposures within the set limits immediately and ensure that all returns submitted to the CBN to provide an accurate reflection of their balance sheets.”

*Warned banks that non-compliance with the NOP limit would result in immediate sanction and suspension from the foreign exchange market.

The circular read in part :“The Central Bank of Nigeria has noted with concern the growth in foreign currency exposures of banks through their Net Open Position (NOP). This has created an incentive for banks to hold excess long foreign currency positions, which exposes banks to foreign exchange and other risks.”

Apparently as part of the moves to fund FX request at the official window, the CBN in its latest circular released on Wednesday accused banks of holding excess foreign exchange positions.

As a result, the central bank gave lenders until February 1, 2024 (today) to sell off excess dollar positions.

in addition, banks were required to borrow and lend in the same currency (natural hedging) to avoid currency mismatch associated with foreign currency risk.

CBN further directed that the basis of the interest rate for borrowing should be the same as that of lending, pointing out that there should be, “No mismatch in floating and fixed interest rates, to mitigate basis risk associated with foreign borrowing interest rate risk.”

With respect to Eurobonds, the central bank advised that any clause of early redemption should be at the instance of the issuer and approval obtained from the CBN in this regard, even if the bond did not qualify as tier 2 capital.

Moreover, all banks were required to adopt adequate treasury and risk management systems to provide oversight of all foreign exchange exposures and ensure accurate reporting on a timely basis.

Banks were expected to bring all their exposures within the set limits immediately and ensure that all returns submitted to the CBN provide an accurate reflection of their balance sheets.

The central bank warned that non-compliance with the NOP limit would result in immediate sanction and/or suspension from participation in the foreign exchange market.

The new circular is expected to force banks to sell off excess dollar liquidity exceeding $5bn.in simple term, what the CBN is saying with this new circular is that, banks cannot hold excess dollar liquidity again. Any foreign exchange they are holding must be committed to something, a transaction or obligation they can prove. The idea is that if banks sell all these excess dollars, there will be liquidity and the exchange rate will stabilise thus encouraging foreign investors to come into the country.

In the first half of 2023, First Bank, UBA, Zenith, Access, and GTB reported a combined N1.38tn in forex revaluation gains.

The Naira, on Thursday, showed signs of recovery from previous losses against the United States dollar at the parallel and official markets after the Central Bank of Nigeria (CBN) removed foreign exchange (FX) cap from the International Money Transfer Operators (IMTOs), and ordered banks to sell excess dollars.

The national currency appreciated by 8.57 percent in less than 24 hours to N1,400 on Thursday, after tipping at N1,520 per dollar on Wednesday at the parallel market, commonly called black market, according to data collated from different street dealers.