CBN moves to slash dollar spending abroad as Forex reserve nosedives

CBN moves to slash dollar spending abroad as Forex reserve nosedives

Friday, April 10, 2015 11:16 pm



With Nigeria’s forex reserve falling to $29.6 billion, the country’s Central Bank is exploring some other measures to stem the decline.

One of the measures is the plan to limit the amount commercial bank customers can spend using their debits cards while abroad.

The Chief Executive of Union Bank, Emeka Emuwa, told reporters after a meeting between the central bank and commercial bank’s representatives that “the limits would be reduced to more judicious levels.”

Currently, customers have an annual limit of $150,000, the regulator said after the meetings with the committee of lenders late on Thursday but did not disclose the new cap.

“There’s been some arbitraging going on,” Emuwa said, adding though card transactions were carried out in naira, offshore vendors had to be settled in dollars.

The central bank also said after the meeting that it would ban corporate loan defaulters from the currency market.

Following the naira weakness the central bank has also fixed the rate at which banks can buy dollars from oil companies.

The central bank devalued the naira last year and pegged the exchange rate in February in order to curb speculation on the currency and save its dwindling foreign reserves.

But reserves have fallen 22 percent to $29.6 billion as at April 7, from a year ago.

The naira has firmed sharply at the unofficial black market since week to converge with the official interbank market at 197 to the dollar after individuals who had stockpiled dollars to hedge against political risk ahead of last month’s presidential elections sold off their holdings when the feared violence and instability did not materialise.

But the currency weakness resumed on Friday with the naira down to 205 at the black market, on thin dollar liquidity. The naira traded at 199 on the interbank market, in line with the tight range within which it has traded since February when the central bank introduced a de facto peg after a devaluation.

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