"Not Time to Stockpile": Bank Warns Nigerians Against Dollar Hoarding Amid CBN Reforms

"Not Time to Stockpile": Bank Warns Nigerians Against Dollar Hoarding Amid CBN Reforms

  • Standard Chartered Bank told Nigerians to stop hoarding money but buy only the amount of dollars needed at a time
  • The bank's head of financial markets urged Nigerians to be patient as it will take some time before the implementations will be seen
  • The chairman of the bank said the foreign exchange problem is causing Nigerians unnecessary stress

Legit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.

Standard Chartered Bank has warned Nigerians not to hoard dollars because of the instability in the foreign exchange market.

Standard Chartered Bank Advises Nigeria on Speculative Activities as Naira Set for Recovery
Standard Chartered Bank advised Nigerians only to purchase as many dollars as needed at a time. Photo Credit: CBN, BDC
Source: UGC

The lender provided this guidance on Friday during its outlook for the global market, according to The Punch report.

This comes after the Central Bank of Nigeria recently churned out policies to ensure liquidity in the market. Legit.ng reported that the apex bank announced that it will stop daily Cash Reserve Requirement (CRR) debits for banks.

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In another report, it imposed limits on how much banks can hold in foreign currencies.

Buy what you need

Ayodeji Adelagun, head of financial markets & rates & credit trading, West Africa at the bank, advised Nigerians only to purchase as many dollars as needed at a time due to the uncertain value of the naira.

Adelagun said:

“This is not the time to speculate; it’s not time to stockpile. It’s time to get only what you need. If you need to pay for something, buy what you need and move on.”

He emphasised that the effort of the CBN to absorb excess liquidity was the cause of the naira's volatility.

“The central bank is trying to mop up as much liquidity as possible to reduce the volume of cash chasing FX. The moment we begin to get to normalcy and FX liquidity is available; we will start to see the effects of some of these policies. So, everything is a derivative of FX management.

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“In getting to the point where liquidity should improve, foreign portfolio investors are likely to get interested in Nigeria, and there is a chance that we can raise money through the Eurobond.”

He said the lack of ease of entry and departure was the most significant concern for foreign overseas portfolio investors.

This, he explained, is because we cannot always determine where to trade a currency based solely on its price on the open market.

He also mentioned that FMDQ has started to release pricing that is a decent representation of current market values.

Because they are likely to have a market rate, he pointed out that this would allow international portfolio investors to bring in their money.

He said:

“It is not going to happen as quickly as we want it to happen, but this is a good development, in which case there is a likelihood that we’ll begin to see a few of them coming. The moment the market continues to adjust, and it is perceived to be positive, it begins to open the door for us to go to a Eurobond issuance."

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The bank's chairman, Foluso Phillips, noted during his speech at the event that Nigerians' responses to the foreign exchange problem were causing needless stress and anxiety.

The bank chairman highlighted that before Nigerians start to notice the effects of the measures being implemented by the central bank, they will need time to settle and initiate the intended process.

This comes after the naira closed on a strong note against the United States in the official foreign exchange market last week.

Data from FMDQ securities showed that on Friday, February 2, 2024, the naira closed at N1,4535/$1 in the Nigerian Autonomous Foreign Exchange Market (NAFEM) segment of the foreign exchange (FX).

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Source: Legit.ng

Authors:
Zainab Iwayemi avatar

Zainab Iwayemi (Business Editor) Zainab Iwayemi is a business journalist with over 5 years experience reporting activities in the stock market, tech, insurance, banking, and oil and gas sectors. She holds a Bachelor of Science (B.sc) degree in Sociology from the University of Ilorin, Kwara State. Before Legit.ng, she worked as a financial analyst at Nairametrics where she was rewarded for outstanding performance. She can be reached via zainab.iwayemi@corp.legit.ng