Nigeria Bans Lenders From Dollar Auctions for Hoarding Cash

Nigeria’s central bank barred some lenders from buying dollars at foreign-currency auctions after they failed to sell the allocations to small and medium-sized companies.

Only eight of the country’s lenders are able to participate in the sales, Central Bank of Nigeria spokesman Isaac Okorafor said by phone, without naming the banks that have been blocked. The ban will be lifted if lenders are able to show evidence of foreign-currency sales to customers, Okorafor said.

Access Bank Plc, Diamond Bank Plc, Fidelity Bank Plc, Heritage Bank Plc, Jaiz Bank Plc, Sterling Bank Plc, Unity Bank Plc and Zenith Bank Plc were exempted from the order instituted on Tuesday, Okorafor said. Nigeria has about 24 banks.

The Abuja-based regulator increased sales of the U.S. currency to lenders in late February to try and curb foreign-exchange shortages that crippled businesses and contributed to the economy’s 1.5 percent contraction in 2016, the first in a quarter century. That boosted transactions in the currency market by 50 percent in March to $9.72 billion, according to the Lagos-based FMDQ OTC Securities Exchange.

The central bank holds specific foreign-exchange auctions for small- and medium-sized companies in which lenders can only bid for dollars if they have orders to back the purchases.

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