Nigeria's central bank has directed commercial banks to pay for their dollar purchases 48 hours in advance, after banning them from accepting foreign currency cash deposits to curb dollar demand and stem illicit financial flows. Dealers said banks would struggle to buy the US currency on behalf of customers, while the ban on dollar cash deposits would stem speculation.
The central bank in June curbed access to the interbank currency market to preserve its foreign reserves. The move led to the diversion of dollar demand to the black market, weakening the local currency. "We are now required to deposit the naira equivalent of our total forex bids to the central bank 48 hours in advance before its intervention," a dealer told Reuters.
The central bank was not immediately available to comment. The measures led to a sharp increase in interest rates on the interbank market, traders said. "The new measure has taken out some huge naira liquidity in the market and putting pressure on the cost of funds among banks," one dealer said. The overnight lending rate jumped to 50 percent on Thursday from 12 percent the previous day, amid low liquidity as some banks scrambled to stock up on the naira to back up their forex demand with the central bank. Ugo Okoroafor, communications adviser to the central bank governor, said the ban on dollar cash deposits with commercial banks was aimed at curbing the "increasing dollarisation of the economy". The naira has lost around 15 percent against the dollar this year.