By Omoh Gabriel, Business Editor
The Nigeria economy is facing financial haemorrhage as Nigerians, corporate bodies are moving funds massively out of the country as well as from naira to dollar. In the last eight weeks a total of $13.894billion went out of the country. While about $757million went out in the week of ending 9th September, the amount of foreign exchange flowing out of the country rose to $1.359billion for the week ending 19th September. It however dropped to $452million on the 3rd of October and moved astronomically to $3.290billion on 17th October. The foreign exchange outflow went further up to $3.356billion on the 31st of October and decline a little to $2.397billion on the 14th of November and $2.02billion and $1.262billion for the weeks ending 21st of November and 28th respectively. This has resulted in the crash of the naira exchange rate which had remain stable in the last two years. But the CBN has attributed the collapse of the naira at the interbank to currency speculators who buy and hold currency for them to sell at a future date to make some gain. The movement of funds out of the country comes by way of Nigeria residents buying up dollars with their naira and moving it off shore.
The trend became noticeable in October where in fact in a matter of weeks several billion of dollars were purchased through the banks, bureau de change. The movement of funds is also in travels- business travel allowance, personal travel allowance, direct remittances etc. According to data obtained from CBN in the eight weeks the total amount of foreign exchange that went out through travels amounted to $72.067million, Debt service/payment $799.194million, Whole sale at the Dutch Auction market $6.276billion, Direct remittance $851.809million, letters of credit $3.205billion and cash sales to banks and bureau de change $3.170billion
Market operators are also seeing it from the perspective that the reduction of credit line to Nigeria banks by their foreign counterparts as a result of the global financial melt down is partly responsible for the high volume of funds leaving the country as the usual 90 days trade credit line has dried up in some banks who have had to meet the needs of their customers through direct sales. The CBN said Wednesday that it will intervened in the matter on Thursday. The central bank said it sold $180 million on the interbank foreign exchange market on Thursday in a bid to stabilise the naira after it fell sharply against the U.S. dollar. According to a CBN source “We went to the market and we sold about $180 million on a two-way quote,” At the open market on Thursday however the naira exchanged for 126 at the official market, 135 interbank market and 145 at the open market to the dollar.
But the Nigeria’s interbank foreign exchange market remained frozen on Thursday as dealers waited to see the out come of the sale of $180million by central bank if it would act to stabilise the naira. Governor Chukwuma Soludo had said on Wednesday that the central bank was ready to intervene from yesterday to ensure stability after dollar supply seemed dried up amid unprecedented demand and banks stopped quoting spreads.
He said the central bank would meet all demand at a market determined exchange rate and that the apex bank was ready to buy and sell as necessary. “The market still remains closed, we are waiting for the central bank intervention. The central bank has called around asking for quotes bankers said on Thursday night.
The naira weakened close to 8 per cent to almost 130 to the U.S. dollar on Tuesday, 135 on Wednesday and 137 on Thursday as dealers digested the impact of the 2009 budget announced by the president and reacted to what appeared to be a managed depreciation of the local currency. The central bank allowed the naira, broadly stable for months, to depreciate further against the dollar at its bi-weekly auction on Wednesday, selling at between 127-129 compared to around 117 a week ago.
It sold only $180 million on Wednesday and $100 million on Monday despite demand of about $2 billion, leaving banks scrambling for dollars from other sources
Money market operators said that dollar demand was being driven by importers before the Christmas trading season as well as by portfolio investors who have been taking money out of Nigeria as the global credit crisis dampens appetite for risk. It has also been fuelled by banks, businesses and individuals — worried by the long-term impact of falling oil prices on Nigeria’s economy — shifting their balance sheets out of naira into U.S. dollars.
One banking analyst said he thought the central bank may have deliberately restricted dollar supply to the market in order to flush out speculators and ascertain the true level of underlying demand.