Nigeria bans dollar cash deposits to stabilise Naira

Stack Of CashNigeria’s Central Bank has banned banks from taking foreign-currency cash deposits as it seeks to bolster the currency of Africa’s biggest oil producer and economy.

Only wire transfers to and from foreign-exchange accounts, also known as domiciliary accounts, are now allowed, the Abuja-based Central Bank of Nigeria said in a statement on its website last week.

The move it said would help “efforts to stop illicit financial flows in the Nigerian banking system.

“The central bank is doing all it can to control demand for dollars,” Sewa Wusu, head of research at Sterling Capital Markets Ltd., said by phone from Lagos.

“It sends another signal to the market that the CBN is assertive and determined to ensure there are no arbitrage opportunities,” he said.

The ban is the latest in a series of controls to support the naira amid a more-than-50 per cent slump over the past year in the price of oil, responsible for about 90 per cent of Nigeria’s export earnings, and save the country’s reserves, down one-fifth to $31.6 billion since the end of September.

Governor Godwin Emefiele in June stopped importers of about 40 types of goods, including furniture, textiles and rice, from accessing official foreign-currency channels, leaving many to use illegal markets.

Large Volumes

Some Nigerian banks including Guaranty Trust Bank Plc and Fidelity Bank Plc sent messages to customers at the weekend informing them that they will no longer accept foreign currency deposits in cash, citing large volumes of such funds in their vaults which they can’t place with the central bank.

 

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