CBN To Stop Oil Firms From Dollar Purchase in Support of Naira

Oct 7, 2011 – CBN To Stop Oil Firms From Dollar Purchase in Support of Naira

The Central Bank of Nigeria (CBN), on Thursday in a publicly circulated letter, said it will no longer allow oil companies to buy U.S. dollars at its auctions to fund oil product importation while saying the firms should use the foreign exchange they earn from exporting crude oil.

The decision by the CBN is expected to reduce U.S. dollar demand at its bi-weekly auctions and support the naira which fell to its weakest ever in the interbank market on Thursday.

The naira weakened to a new record low of 164.85 to the U.S dollar in the interbank market pressured for a second day by comments made by the central bank that it will not support the local currency at all costs.

CBN governor, Lamido Sanusi, had said on Wednesday that the naira could be allowed to devalue if oil prices and foreign exchange reserves continue to fall and monetary intervention attempts are exhausted.

CBN has been pumping U.S. dollars into the market at bi-weekly auctions to help support the local currency but without any sustained success.(Daily Times)