The decision of the Foreign Portfolio Investors, FPIs, to exit the country in the wake of the Coronavirus (COVID-19) pandemic as well as the huge decline in the price of crude oil in the international market have put severe pressure on both external reserves and the exchange rate. As at last weekend, oil price lost for the third consecutive week on the back of declining global demand due to economic lockdown globally.
An agreement by major oil producers to reduce global output have failed to lift prices amid low storage concerns which hindered positive response in the global oil market. Following this, Brent crude price declined 11.6% week-on-week to US$24.8/bbl. while Nigeria’s external reserves further declined 0.1% to US$33.6billion. Consequently, at the parallel market, the Naira depreciated ?14.00 to close at ?420.00/$1.00. At the Investors’ & Exporters’ (I&E) Window, the NAFEX rate depreciated ?0.33 to settle at ?388.78/$1.00. The activity level in I&E Window fell 38.7% to $187.8million from $306.3million recorded in the previous week. Lower Dollar spending limit on debit cards In response to the decline in dollar supply as well as rising demand, some banks, namely Zenith, Fidelity, GTBank reduced the monthly dollar spending limit on debit cards. While Zenith Bank reduced monthly limits to $1,000, Guaranty Trust Bank reduced monthly limits to $500. Fidelity Bank on its part reduced monthly limits to $1,000 from $3,000. Disruption in banking services In addition to its rattling effect on the foreign exchange and fixed income markets, the COVID-19 pandemic has also caused massive disruption in banking services, as banks implement social distancing rules, in a bid to battle the spread of the Coronavirus. For example, from the third week in March and prior to the lockdown of Lagos, Ogun States and Abuja, most banks directed non essential staff to work home. Banks also restricted the number of customers allowed inside the banking halls per time to 25 people, leading to massive crowds outside banking halls with customers spending more time to gain entry into the banking hall. Furthermore and following the lockdown in Lagos, Ogun States and Abuja, the CBN suspended cheque clearing activities till further notice while banking service was further reduced to skeletal operations in across the country, with transactions restricted to electronic payment channels and ATMs for cash withdrawals.