Banks ask customers to submit bids as new interbank rate kicks-off today

By Odunewu Segun

Commercial banks in the country have asked prospective customers of forex to submit bids ahead of the start of new interbank foreign exchange trading that starts today.

National Daily gathered after a meeting with central bank officials and bank chief executives late on Friday, banks asked their clients to send them pending letters of credit (LCs) for them to resubmit and to quote a rate at which they want to buy dollars, the source said.

According to a source in one of the banks, Customers have so far submitted bids between 210 and 290 naira to the dollar, the source said.

“I got a memo from my bank yesterday asking us to contact all our customers with pending LCs to resubmit their LCs and say at what rate they would want to buy the dollars,” the source said.

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“Liquidity will likely return to the market because central bank will now sell its dollars at higher rates.”

The apex bank had Wednesday said it would begin market-driven trading of the naira to alleviate chronic foreign exchange shortages, but it has given few details on how.

Banks asking customers to submit bids is a signal that the new forex trading platform will be driven by market forces and not dominated by internal bank trading.

The central bank has pegged the naira rate at 197 to the dollar for the past 16 months after a slump in oil revenues hammered public finances and its foreign reserves. But the currency trades at around 355 on the parallel market.

There is a $4 billion backlog of demand in the market which could take three to four weeks to clear, the central bank has said.

Commercial lenders will set the first exchange rate of the naira versus the dollar when the currency is allowed to float freely after the central bank abandoned its dollar peg, bankers have said.