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New FX regime: Naira records first gain, as CBN intervenes for third day

 Following the Central Bank of Nigeria (CBN) sale of US dollars to improve dollar liquidity in the interbank market, the nation’s currency, the naira, recorded its first daily gain on Wednesday since the winding up of the 16-month peg on the currency.

The naira, which had dropped by 30 percent when the new forex regime commenced on Monday, and traded as weak as N285 to the dollar, gained a total of four point (N4) at the close of Wednesday’s market.

The local currency traded at N281.50 to a dollar, from N284 sold on Monday when the naira floating began, but the apex bank has continued to intervene at the interbank forex market for the third day running, so as to ease dollar shortages, traders said.

For instance, the CBN has sold around $4 billion in spot and forward trades to clear a backlog of dollar demand but continued to intervene on the interbank to improve liquidity and allow the currency trade freely on the interbank market but traders said dollar liquidity was tight, leaving the CBN as the main supplier of hard currency.

However, forex traders said on Wednesday that banks were quoting to buy the dollar between N281 to N295, with only $360,000 exchanging hands by 1015 GMT, traders told Reuters.

Meanwhile, the appointment of FX primary dealers has continued to generate controversies among industry stakeholders, as regards the criteria for selection and appointment of the current 15 approved primary FX dealers.

Specifically, the Revised Guidelines for the Operation of the Nigerian Inter-Bank Foreign Exchange Market released by the CBN on Wednesday, June 15, 2016 stated that: “The CBN shall evaluate and approve the application of an Authorized Dealer as an FXPD based on meeting at least 2 of the following 3 Quantitative Criteria as of 31st May 2016.

“2.1 Minimum Shareholders Fund Unimpaired by losses of at least N200.00 billion; 2.2 Minimum of N400.00 billion in Total Foreign Currency Assets; and 2.3 Minimum Liquidity Ratio of 40 percent.”

It would be recalled that trading on the Nigeria Interbank Foreign Exchange (NIFEX) began on Monday, as the CBN sold foreign exchange to 21 bidding banks to clear the forex backlog and solve liquidity problems, even though the apex bank eventually appointed 15 of the Deposit Money Banks (DMBs) operating in the country as primary forex dealers.

According to forex traders, appointed dealers included Stanbic IBTC Bank; Standard Chartered Bank; Citibank; Zenith Bank and Access Bank. Also, included are United Bank for Africa (UBA), Sterling Bank and First City Monument Bank (FCMB) and Wema Bank.

The development has also continued to generate calls from different sectors and finance stakeholders requesting that the apex regulator should also consider them worthy of being among the nation’s primary FX dealer.

Association of Bureau De Change Operators of Nigeria (ABCON) on Tuesday called CBN to grant it one of the Forex Primary Dealership (FXPD) licences.

ABCON President, Alhaji Aminu Gwadabe, who disclosed the group’s position, said as a major and critical stakeholder in the forex business, it will be against standard business practice to exclude bureaux de change (BDC) operators from the workings of the new CBN forex policy.

He said such licence would enable bureaux de change (BDC) operators access Diaspora remittances estimated at $21 billion annually and by extension, deepen dollar liquidity in the system.

 

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