Commercial Banks in Nigeria have now stopped receiving cash deposits in dollars. This is another bold move by the CBN to stop the speculation of the naira.
Most depositors who have domicialliary accounts with commercial banks in Nigeria received emails from their banks informing them that they will no longer be receiving cash deposits. A such, if you want to have dollars in your account it will have to come through electronically.
In an email sent to Nairametrics yesterday a commercial bank wrote
Due to the increased influx of FCY cash deposits and the challenges with managing outflows, it has become necessary to temporarily suspend the receipt of foreign exchange cash deposits into domiciliary accounts from Thursday, 30 July 2015. This suspension affects our US Dollar, British Pounds and Euro domiciliary accounts.
We will however continue to receive payments into domiciliary accounts via electronic fund transfers and customers will also continue to have access to funds in their domiciliary accounts.
This move is by all means the boldest yet by the CBN and is likely to significantly affect the parallel market . It is surely not the singular reason for the strengthening of the naira considering other actions that the CBN had undertaken in the past.
For example, the CBN had restricted the amount of forex that can be spent or withdrawn from an ATM abroad, banned 41 items from accessing the official forex market, heightened rhetoric on people traveling with forex at the airports and also basically saying they don’t care about what is happening in the black market. The central bank fixed the spread at which bureaux de change operators can sell dollars to individuals, and has also limited the amount bank customers can spend using their debits cards abroad.
Add to recent backing by no other than Dangote, the richest man in the country. The fear of Buhari of course is also a major factor as public thieves know the president will not back anyone known breaking any of the forex rules.
Although the restrictions have angered some investors and frustrated companies that need dollars for imports, Emefiele has blatantly rejected the idea of loosening restrictions, saying the central bank could not adopt an “indeterminate policy” of currency depreciation.
For speculators there will be no point buying dollars anymore except you have a ready made buyer. If you don’t then your choice will be to keep the dollar under your mattress as no bank will accept it. Those who now have dollars have little option but to sell as they can only now exchange the green back with only those in the parallel market. It also means importers or exporters trading in illicit business have no where to deposit forex thus limiting activities in the black market to only those in absolute need of forex.
This of course is not all good as it only means banks will have to learn to manage their forex hoard better or risk facing a liquidity squeeze.
There is also risk that the Naira will still be devalued but we feel this will happen after the CBN believes it has basically driven out speculators and now left with a fair idea of what the legitimate demand for dollars is. Then it could effect a devaluation. For now though, the Naira looks like it’s the new King in town.
Very unfortunate for a country that don’t have a real direction of a better monetary economic policies, if the black markets are allowed to strive what kind of monetary policy can succeed for a better value for Naira. May be the CBN is being used to checkmate corrupt politicians who have lots of foreign currencies stocked with them. In other words: I also hope the operators of the black market are not allowed to deposit foreign currencies just like every other Nigerians. Let see what happens in the next few weeks.