Elections: Demand for dollar soars.

THE latest upsurge in the demand for the US dollars has begun to cause ripples in the nation’s financial sector,

particularly the foreign exchange market.

Market sources confirmed that unrelenting demand from bureaux de change (BDCs) and wealthy Nigerians stock-piling hard currency ahead of the general election was making the large dollar inflows from energy firms have little impact on the system.

“Some banks are long-on dollars even above their open position limit, while the uncertainty around the April polls continues to cause panic buying of dollars among wealthy Nigerians," one dealer said.

The naira traded at N155.30 to the dollar for the better part of last week, as dollar liquidity from sales by oil companies and some banks balanced out demand at the interbank market. The unit hit a record low of 157.55 on March 18.

The Central Bank of Nigeria (CBN) sold $300 million at N151.52 a dollar at its bi-weekly foreign exchange auction on Wednesday, as well as $203 million in short-tenored foreign exchange forwards at the second auction of its kind.

Meanwhile, the cost of borrowing is set to further rise this week as the financial system faces illiquidity.

In particular, the interbank market segment of the foreign exchange market would be worst hit as the Nigerian National Petroleum Corporation (NNPC) remittances drain liquidity from the system.

Dealers in the market opined that apart from withdrawal of funds by the NNPC, there would also be outflows to forex purchases.

“The outlook favours a slight increase in the cost of funds this week, since there are no anticipated cash inflows, while outflows to foreign exchange purchases and NNPC remittances would drain more liquidity from the system,” one dealer said.

The NNPC, which sold around $500 million to some banks as part of its month-end dollar sales, last week, was expected to transfer its proceeds to its Central Bank of Nigeria (CBN) account this week.

Meanwhile, the interbank lending rates rose to an average of 10.58 per cent last week, from 10.41 per cent the previous week, after big cash outflows to foreign exchange purchases drained liquidity from the system, traders said on Friday.

The secured Open Buy Back (OBB) was stable at 9.50 per cent, 200 basis points above the apex bank’s 7.50 per cent benchmark rate and 4.5 percentage points higher than the Standing Deposit Facility (SDF) rate.

Overnight placement climbed to 11.00 per cent from 10.75 per cent, while call money inched up to 11.25 per cent from 11 per cent.

The CBN sold a total of $886 million at its bi-weekly forex auctions last week, while treasury bills sales were mainly a roll-over of previously mature ones, traders said.

The indicative rates for the Nigeria Interbank Offer Rate (NIBOR) rose, with the seven-day funds rate inching up to 11.58 per cent from 11.45 per cent.

The 30-day fund was unchanged at 12.58 per cent, the 60-day traded at 13.30 per cent from 13.11 per cent, while the 90-day closed slightly lower at 13.84 per cent from 13.85 per cent.

Meanwhile, huge spending by politicians to mobilise electorate for the election has caused a scarcity of naira in bureau de change and automated teller machines (ATMs).

Investigation by the Nigerian Tribune revealed that the declaration of Friday, last week, as a public holiday, which saw Nigerians making huge withdrawals ahead of the botched National Assembly elections, also added to the scarcity.

A frontline traditional ruler in Oyo State, who sent his aides to the bureau de change operators in Sabo area of Ibadan, in the hope of changing some foreign currencies to the naira, was told that naira currency in their possession had been “mopped up.”

According to checks, most Nigerians who visited ATMs on Sunday, in the hope of getting some Naira notes as a precautionary measure against the likely declaration of today a work-free day for the rescheduled poll, returned with dashed expectations, as there was no money in the machines.

In Ibadan, Oyo State, most of the ATMs visited could not pay out and people were seen moving from bank to bank, trying to make withdrawals.

A bank official who spoke with the Nigerian Tribune said the postponed election was unexpected.

The Friday and impending Monday holiday, he stressed, had made it somewhat difficult for banks to ensure the adequacy of funds for customers as such short notice.

He appealed to customers to bear with their banks.

Written by Odidison Omankhanlen, Biola Azeez, Dare Adekanmbi and Rotimi Ige

Monday, 04 April 2011
Source : www.tribune.com.ng
PS : I hope it's not because dollar has not exchanged hands well enough that made the elections to be postponed. In any case all my fingers (not only thumb) are available for 'thumb' printing of ballot papers     if the dollars get to me. Lol