Nigeria: Banks to withdraw from CBN forex agreements

Dec 16, 2016

This is triggered by lack of confidence in Nigeria Central Bank's forex policy.

A number of commercial banks in Nigeria are withdrawing forex agreements worth billions of dollars from the Central Bank of Nigeria (CBN). The gesture is coming due to CBN's lack of policy credibility in managing the forex crisis in Nigeria. As the CBN swaps foreign currency to bolster dollar reserves with about six of the country's 22 banks, banks have started refraining CBN from renewing these swaps because they have lost confidence in management of forex market by the CBN authority. Speaking on this development, the treasurer of Access Bank, Dapo Olagunju said "the net reserves level is now a very serious concern because the government has not been able to attract new funding flows to grow its reserves and all we have seen over the past 18 months is a consistent reduction in reserves." In a similar vein, the head of a bank in Lagos said "if you don't have a clear sense that the central bank has policies in place to keep reserves at a reasonable level, of course you worry about their ability to repay and become more cautious." Since oil prices crashed in global oil market which has reduced Nigeria's revenue, the nation's gross reserves dropped by 40 per cent to $24 billion. The decision of banks to minimize exposure to CBN stopped investors from infecting hard currency into Nigeria.