The rapid freefall of the Naira is a result of the country’s dire financial situation. The currency has plunged to its lowest level in over a decade and there is no respite in sight, despite the rapid intervention of the Central Bank to step the rapid depreciation of the currency versus the US dollar.
Bankers last week said the lack of policy credibility in managing the currency raises questions about Nigeria’s ability to provide dollars to banks as recession deepens. Several banks threatened not to renew agreements worth billions of dollars with the Central Bank of Nigeria, highlighting the erosion of confidence in the apex bank.
The central bank governor, has sought to use foreign currency swaps to bolster dollar reserves, swapping large amounts of naira in return for dollars with about six of the country’s 22 banks.
But bankers say they have begun refusing to allow the central bank to renew these swaps — most of which expire within the next year — because they have lost confidence in the CBN's management of the currency and foreign exchange market.