TheCable

The Central Bank of Nigeria (CBN) has shut down the interbank foreign exchange market till January 4, 2016.

The closure, which is the norm in the banking sector, was expected to have been later than Monday, considering the position of the naira on the parallel market.

The naira fell to a record low of N280 to the dollar at the parallel market after beating what was initially regarded as a 42-year-low.

The national currency however appreciated to N270 on Friday, after the sale of over $20 million by the apex bank to the bureau de change (BDC) operators.

It was however expected that the CBN would pump more forex to the parallel market while the interbank FX market is shut through the festive period, but it remains unclear if that has been done.

In February, the CBN shut down the Wholesale Dutch Auction System (WDAS) and Retail Dutch Auction System (RDAS), limiting the sales of FX to the interbank market.

Ibrahim Mu’Azu, director of corporate communications at CBN, said in a statement that the bank was closing the official window to end the multiple exchange rate and preserve the country’s dwindling external reserves.

He said due to “undesirable practices, including round tripping, speculative demand, rent seeking, spurious demand and inefficient use of scarce foreign exchange resources by economic agents, it has become imperative that appropriate actions be taken to avert the emergence of multiple exchange rates regime and pressure the country’s foreign exchange reserves.

“Consequently, we wish to inform all authorised dealers and the general public that with effect from the date of this press release, the rDAS/wDAS foreign exchange window with the CBN is hereby closed. Henceforth all demand for foreign exchange should be channeled to the interbank forex market.”

With the interbank market now closed for the next 14 days, dollar scarcity may rock the economy and the naira may further depreciate below N280.

The naira opened on the parallel market on Monday at N265 to the greenback.