The nation’s currency, the naira, on Wednesday lost significantly against the US dollar by N6.40k or 3.5 percent at the inter-bank market due to strong demand for the greenback as the Central Bank of Nigeria (CBN) held its last foreign exchange auction for the year.
Consequently, after trading on Wednesday, the local currency closed at N187.10k/$ as against N180.70k/$ the previous day at the inter-bank market, according to data obtained from Financial Markets Dealers Quotations (FMDQ).
The CBN on Wednesday sold some amount of dollar to some deposit money banks at its twice weekly Dutch Auction System (RDAS).
The naira weakened 1.1 percent against the USD in the inter-bank (-12.7% YTD) on December 16, 2014. Strong USD demand, driven by importers, repatriation of profits, and speculation (given the uncertainty of the managed exchange rate regime) continue to undermine NGN.
Meanwhile, the CBN has reviewed the foreign exchange trading position of banks and other dealers to zero percent of shareholders’ funds (SHF) unimpaired by loses, from its current position of 1 percent.
The development, according to a circular signed by Gbadamosi O.I., director, trade and exchange department, CBN, takes immediate effect.
Consequently, authorised dealers are required to maintain zero percent of their shareholders’ fund as foreign exchange trading position at the close of each business day.
The CBN said any infraction of the requirement, in anyway whatsoever, will attract appropriate sanction which may include suspension from foreign exchange market.
The CBN is concerned with the recent developments in the foreign exchange market and its consequences on the stability of exchange rate.
Source : BusinessDay