The situation with the Nigerian Naira going through a weakened spell when measured against the United States Dollar had begun to look like it was going to be a daily occurrence, so there had to be serious deep-thinking going on at the Central Bank of Nigeria (CBN) to check this.

Before Wednesday, 31 January when the CBN handed out instructions to commercial banks asking them to dispense excess foreign currency assets in their keep and to do that under 24 hours, the Naira had been experiencing a massive decline which was extremely fast-paced.

When the value of the Naira drops, it leads to a further hike in the price of goods and services. Hikes have become regular since last May when the petrol subsidy was removed and then leaving the wholesalers to confront problems getting patronage for the products they are offering.

The central bank’s recalibration was looking due yesterday, and then the Nigerian Naira suddenly saw a rebound to ₦1,350 in the Federal Capital Territory (FCT).

ALSO READ: How the Naira looked on Tuesday when matched against the dollar

This suddenness apparently, was due to the banks and their Bureau De Change (BDC) Forex-trading counterparts, attempting to sell off the foreign currency in their stocks in haste.

With the healthy supply of highly coveted dollars to customers came the easing of demand pressure and hence, the brief strengthening of the Naira that is being witnessed.

Today, because of our small action, says BDC operator Ibrahim Yahu, you could not get a standard price. Those who bought today did so at risk. But the dollar sold between ₦1,300 and ₦1,350.

Mr Yahu, who was speaking to Punch News represented the FCT segment of the BDC market. The current rate recorded on Thursday is only restricted to the area as there are differing rates in other places. Like in Lagos where the value goes for ₦1,420 to a dollar.

Although the Naira can’t be seen to have made its final landing yet, it holds its slight advantage to the recent tweak which was conveyed in the Wednesday-published statement, The Central Bank of Nigeria (CBN) has noted with concern the growth in foreign currency exposures of banks through their Net Open Position (NOP).

This has created an incentive for banks to hold excess long currency positions, which exposes banks to foreign exchange and other risks.

Therefore, to ensure that these risks are well managed and avoid losses that could pose material systemic challenges therefore the CBN issues the following prudential requirements, which require commercial banks to maintain a specific stock of foreign currency assets.

Ayodele Johnson

Ayodelé is a Lagos-based journalist and the Content and Editorial Coordinator at Meiza. All around the megacity, I am steering diverse lifestyle magazine audiences with ingenious hacks and insights that spur fast, informed decisions in their busy lives.