The Central Bank of Nigeria debited commercial banks’ accounts for special foreign exchange sales and overnight lending rate jumped to around 50 per cent.
CBN Forex Sales Increases Interbank Rate to 50%
The Central Bank of Nigeria debited commercial banks’ accounts for special foreign exchange sales and overnight lending rate jumped to around 50 per cent on Friday, from an average of 4.5 per cent on Thursday.
On Monday December 19, CBN told banks to submit bids for a “special currency auction” to clear the backlog of matured outstanding dollar obligations for certain sectors of the economy, including aviation, fuel importation and manufacturing.
The central bank sold “funded forwards of two to five months tenor” dollars to the targeted sectors at an auction this week and required them to pay for the dollar sale on Friday, forex traders said
No Information on Amount of Forex Sold
The CBN has at now not disclosed the amount sold but currency traders said the cost of borrowing among banks jumped due to a rush for funds among commercial lenders to pay for the forex purchases according to a Reuters report.
Cause of Recession
Nigeria, a mono-economy drive by oil is in her first recession in 25 years due to low global oil prices that cut the supply of dollars needed to fund importation.
Dollar earned was reduced due to attacks by militants on pipelines in the Niger Delta since January. These attacks cut crude output.
Side Effects of Recession
The scarcity of dollar the nation has led many companies to stop operations and fire workers making the economic crisis worse.
Naira has been trading at around 305.5 to the dollar on the official interbank market since August but it was quoted at 495 to the dollar on the black market on Friday.
Nigerian financial markets have closed until Wednesday due to Christmas holidays.