By Francis Ogwo
The Central Bank of Nigeria, on Friday, deducted N216bn from banks’ accounts as Cash Reserve Ratio (CRR) in a latest move to mop up liquidity and prevent speculation in the foreign exchange market.
According to a release by the apex bank on Monday 22nd June, 2020, it has in addition, mopped up N80bn through sale of secondary market (Open Market Operations, OBB) treasury bills.
The resultant effect of this action is a sharp rise in the cost of funds with interest rate on Collateralised (Open Buy Back, OBB) lending rising by 740 basis points (bpts) to 15.17% from 8.3% the previous week.
In the same vein, interest rate on Overnight lending rose by 684 bpts to 16.67% on Friday from 9.83% the previous week.
The bank also had, in another development, returned N338bn to bank customers for unsuccessful bids at its retail foreign exchange auction.
This situation showed unwillingness to further use the nation’s declining external reserves to meet dollar demand from end-users.
Already, reports say, the external reserves declined for the second consecutive week, falling to $36.316 billion on Thursday last week from $36.446 billion on Thursday June 11th, 2020.
This represents week-on-week decline of $130 million. Consequently the reserves had fallen by $256 million since May 29th, 2020 when it peaked at $36.594 billion.
This development showed in last week’s depreciation of the naira in the parallel market and in the Investors and Exporters (I&E) window.
In the parallel market the naira depreciated by N7.5 as the exchange rate rose to N455.5 per dollar on Friday from N448 per dollar the previous week.
In the I&E window, the naira depreciated by 75 kobo as the indicative exchange rate for the window rose to N386.5 per dollar from N385.75 per dollar the previous week.
