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Naira in free fall as OPEC, bank chiefs meet this week

Last week, the Central Bank of Nigeria (CBN) further depreciated the naira by 182 kobo on its Retail Dutch Auction System (RDAS) sales to Money…

Last week, the Central Bank of Nigeria (CBN) further depreciated the naira by 182 kobo on its Retail Dutch Auction System (RDAS) sales to Money Deposit banks from N156.68 per dollar to N158.41 per dollar
The apex regulatory body has also reduced significantly the amount of dollar sales in the RDAS market from $378 million to $110 million, the lowest sales since January this year.
These actions were viewed by financial analysts as causes of current depreciation of the naira. For instance, Aminu Gwadabe, President of Association of Bureau de Change Operators of Nigeria (ABCON) described the lifting of the 10kobo margin on CBN weekly intervention fund as policy summersault as this would further give banks further opportunity for arbitrage and thus weaken the nation’s currency.
The banks average selling rate as at Friday was N179 per dollar and the street rate hovers around N182 per dollar.
Gwadabe however implored the apex regulatory bank to reconsider and review the present $15,000 weekly allocation to at least $50,000 weekly to BDCs as well as the restriction of payments for bills for collection in the RDAS.
He said reduction of the N35 million caution deposit to maximum of N10 million  and the use of treasury bills’ interest rate on the revised caution deposit of N10 million as against the present saving interest would further help in strengthening the naira.
“Available evidence in the Lagos markets indicated that importers have started jerking their prices up to mitigate the effects of the failing naira. CBN should intensify lobbying and moral suasion to banks and BDCs to save the situation. The BDC operators on their part under its umbrella body is organising a stakeholders conference to brainstorm and synergise on way forward,” he said
However, the bank chiefs along with CBN to be led by its governor will be meeting on November 25 in Abuja under the bankers’ committee to unveil plans on how to save the naira from further plunge.
The policy makers have left the benchmark rate unchanged since October 2011. Inflation slowed to 8.1 percent in October from 8.3 percent the previous month.
The Organisation of Petroleum Exporting Countries (OPEC) will be meeting in Vienna, Austria, this week, to brainstorm on how to curtail the declining price of crude oil in the international market as well as urging members to adhere to quota system.
The 13-member nation body pumped 30.97 million barrels a day in October, exceeding its collective output target of 30 million barrels a day for a fifth straight month, according to a Bloomberg survey.
Although, a barrel of Nigeria’s Brent gained $2 per barrel to close the week at $80 per barrel, analysts were of the view that member nations may not witness appreciable price on a barrel of crude this year even if OPEC cuts down on its daily output due to lack of demand worldwide.

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