Saturday, 31 December 2016

CBN OFFERS $1BN TO CLEAR BACKLOG IN BIGGEST DOLLAR SALE

The Central Bank of Nigeria (CBN) has sold about $1 billion on the forward market to clear a backlog of dollar obligations in selected sectors. Outstanding dollar demand was about $4 billion before June when the 16-month-old peg was removed and efforts to cut dollar demand have been largely unsuccessful due to low oil prices resulting in crude sales accounting for about 90 per cent of Nigeria’s foreign exchange earnings.

Traders, a few days ago, revealed that the central bank told banks to prioritise airlines, manufacturing firms, petroleum products importers and agriculture sectors, the sectors worst hit by the dollar shortage, in the auction.

“The central bank sold $1 billion at last week’s special forex auction and directed banks to issue fresh letters of credit to reflect the amount sold in favour of the affected sectors,” a senior currency trader told a foreign news outlet. Traders also said the central bank sold 30-day and 60-day forwards at the auction.

On December 19, 2016, the central bank instructed commercial lenders to submit their backlog of dollar demand from fuel importers, airlines, raw materials and machinery for manufacturing firms and agricultural chemicals for the special forex intervention.

The dollar shortage in the OPEC member, whose crude sales make up two thirds of government revenue, has caused many companies to halt operations and lay off workers, compounding the economic crisis and even leading to some foreign airlines closing shop or reducing their operations over the inability to repatriate the proceeds of their earnings due to dollar shortage.

Earlier on Thursday, the naira was trading at about N305.25 to the dollar on the interbank market and was quoted at N490 a dollar on the unofficial market. (Sun)