There are allegations that some Deposit Money Banks (DMB’s) are hoarding dollars, a situation which the Central Bank plans to address with the requisite sanctions.
So, there is a possibility that the Naira may rise higher than it is currently after the DMB’s have been sanctioned.
There are a few banking rules that the Central Bank of Nigeria (CBN), frowns at, hoarding of foreign exchange is one of these rules, among so many others.
When banks do, it whips up artificial scarcity triggering a rise in value of the dollar while the Naira crashes.
Now, some Deposit Money Banks (DMB’s) have been fingered for flouting this rule and the CBN is planning to come down hard on them.
Have You Read: M.A.N Reacts To CBN Lifting Ban On 43 Items
It has been alleged that hoarding of foreign exchange and round tripping by the DMB’s are contributing factors to the free fall of the Naira.
The CBN believes this act is sabotaging government’s effort to halt the free fall of the Naira in a bid to strengthen the national currency.
Hoarding Dollars For Gains
Some banks are speculating, purchasing from the Investors & Export window and selling for profit in parallel market, it was also gathered.
A Bureau De Change (BDC), operator who craved anonymity, confirmed that banks are hoarding dollar in other to make huge profit.
He stated that hoarding was partly responsible for the unification of exchange markets not delivering successes as envisaged by the Federal Government.
“Some banks are speculating, purchasing from I&E selling for profit in parallel market.
So, artificial demands are driving up forex rates and that is working against the efforts of the CBN to stem the slide of the Naira,” the operator said.
However, a CBN source also said that speculators were keeping piles of dollars with plans to trade for massive profits in future deals.
CBN’s Will Sanction Defaulters
The source, however, disclosed that there were plans to address the issues of speculation comprehensively through heavy sanctions on defaulting banks and BDC operators.
“Government through the apex bank, plans to probe bank hoarding and roundtripping with heavy sanctions awaiting defaulters.
“This is because the apex bank believed hoarders, banks and black parallel operators are responsible for the artificial scarcity that is driving up forex rates.
“Government’s plan through the regulator, is to address the issues of speculation comprehensively and through heavy sanctions.
“The World Bank and the International Monetary Fund (IMF) had greenlighted the unification but insisted that more efforts are required for the full dividends to be delivered.
“That was why CBN ordered recently that banks shouldn’t use the gains from re-evaluation to pay dividends or meet operational expenses.
“Heavy sanctions may force defaulting banks to release forex,” the source said.
You May Also Like: Can Olayemi Cardoso Truly Turn CBN Around? What We Know
Naira Will Appreciate In Coming Days
However, it was gathered that in the coming days, the Naira will start appreciating against the dollar due to the removal of forex restrictions on 43 items by the CBN.
According to economist, removing the restrictions, would eliminate the need for importers of the banned products to go to the parallel market, reducing the pressure on the Naira.
Experts think “the hitherto FX restrictions had implications on inflation, causing the prices of affected goods to increase”.
