CBN set to clear backlog dollar demand for fuel importers, others

The Central Bank of Nigeria (CBN) has called on all commercial banks in the country to submit the backlog of dollar demands from fuel importers, airlines, manufacturers of raw-material and agricultural chemicals and machinery for manufacturers.

The CBN in a memo to the banks asked the banks to bid in a special currency auction to clear the buildup of dollar obligations owed the operators in the various sectors, Reuters reported on Wednesday.

Although they did not specify the amount of dollar to be sold to the banks, some of the traders who spoke on the issue quoted the apex bank as saying it would hold a retail foreign exchange auction yesterday to sell two- to five-month dollar forwards to clear the outstanding dollar demands.

The CBN had in October last year approved a Special Secondary Market Intervention Retail Sales (SMIS) for airlines operating in the country.

The central bank governor, Godwin Emefiele, had on Tuesday denied allegations that the bank was allocating dollars to end users, saying request for foreign exchange were made through their banks.

He however said the bank would increase dollar allocation to the banks and licensed bureau de change (BDC) operators with special consideration to manufacturing industries that need to import raw materials and spare parts in a bid to discourage a situation whereby street currency traders determine its rate to the dollar.

Nigeria’s government debt is 77% denominated in local currency, which makes it less susceptible to exchange rate risk, but the share of foreign currency debt is increasing. Additionally, the government faces contingent liabilities from approximately USD5.1bn in debt owed by the Nigeria National Petroleum Corporation to its joint venture partners.