There is no plan to convert dollars, pounds, or any other foreign currencies in Nigerians’ bank accounts to naira, says the Central Bank of Nigeria (CBN).
In a statement on Sept. 11, the bank said it “has not contemplated, and will never contemplate, any such line of action. The speculation is a completely false narrative aimed at triggering panic in the foreign exchange market.”
The clarification comes as the naira continues to weaken due to rising dollar demand, especially in the black market. While the official exchange rate holds steady around 410 naira for one dollar, the price on the street has risen from less than N500 mid July to N550 in Lagos today—the naira’s lowest level against the dollar in more than four decades, according to TheCable.
CBN policy triggered dollar scarcity
Nigeria’s currency trouble is well known but decline in the last two months has been noteworthy. On July 27, the CBN decided it would no longer sell forex to roadside money changers (known formally as bureau de change operators), whom the bank accused of enabling corruption in the economy by exceeding the stipulated $5,000 limit per transaction. Nigerians who needed forex—for travel allowance, medical payments, tuition or SME transactions—should go to commercial banks, the CBN said.
Banks were mandated to set up special teller points to fulfill demand, and consumers were encouraged to report instances where banks refused legitimate requests.
In reality, Nigerian banks have not coped well with the adjustment. Some customers seeking to buy dollars even say their banks referred them to black market operators, effectively causing a hike in dollar prices.
Banks could receive dollars to meet demand
The CBN’s strongly-worded rebuttal of the dollar conversion rumors has calmed domiciliary account holders. While the action did not appear imminent beyond social media chatter, the CBN’s image over the past year has been of a regulator willing to vigorously defend the naira, even if it means getting a court to speedily suspend certain businesses.
But to solve the overall dollar shortage and counter black market rates, dollar supply to banks has to increase. It appears the regulator has a plan for that.
A report in This Day last week, based on the comments of unnamed senior CBN officials, said the bank planned to direct more dollars to commercial banks. The report said the injection began on Sept. 10, with officials offering assurances that there will be enough dollars to serve legitimate requests.
“Let those going to [the] black market illegally desist from doing so,” the officials were reported as saying. “Their banks will sell them dollars through any of the approved channels. If anyone is refused, he/she should come out openly to report the bank. We will deal with the bank.”
Sign up to the Quartz Africa Weekly Brief here for news and analysis on African business, tech, and innovation in your inbox.