By Babajide Komolafe

The interbank money market was paralysed by the five-day strike action, causing banks to shun foreign exchange offered by the Central Bank of Nigeria (CBN).

Throughout the week, there was no interbank transactions, as most treasurers stayed at home, while few went to work only for skeletal treaury functions. The CBN, being a government agency did not join the strike, and hence, still conducted foreign exchange auctions on Monday and Wednesday. On Monday, it offered $250 million, while it offered $200 million on Wednesday but demand to both offers was zero though

Investigation revealed that the apex bank consequently resorted to calling the banks’treasury departments one by one, to attract patronage for the offers.

“They called me on Wednesday but I told them we are not interested in the offer,” a senior bank treasurer told Vanguard.

Sanusi Lamido Sanusi

Although the apex bank succeeded in selling the $250 million it offered on Monday, it was, however, only able to sell $171 million of the $200 million offered on Wednesday. Consequently, the naira appreciated by 13 kobo on Wednesday as the official exchange rate dropped to N156.7 per dollar from N156.83 on Monday.

“The fact that the naira recorded appreciation of that magnitude shows that most people were not interested in the offer,” said a foreign exchange dealer.

Investigations further showed that the foreign exchange sold might have been purchased mostly by the internationally affiliated banks, as their treasury departments functioned throughout the strike.

Compared to the two previously held auctions, the amount sold by the CBN at the two auctions held last week represents 15. 8 per cent decline. The apex bank sold $421 million last week, while it sold $500 million in the two previous auctions.

Meanwhile, the foreign exchange market is expected to experience upsurge in demand when the strike is over and banks resume fully. “We expect some immediate spike in foreign exchange demand as the strike ends because of the backlog of demand for U.S. dollars,” said Samir Gadio, an emerging market strategist at Standard Bank Group Ltd.

On the international scene, the euro dropped, reaching a 16-month low versus the greenback, amid speculation Standard & Poor’s may downgrade the credit ratings of several countries in the 17-nation currency region today.