The Nigerian central bank plans to boost its dollar sales to exchange bureaus after the currency weakened sharply on the black market. On Thursday, the naira weakened by 1 percent on the black market to 370 per dollar, its weakest since August 2017. The Central Bank of Nigeria (CBN) said on Friday it would introduce a special forex intervention to meet demand from individuals with dollar expenses by increasing its auction days to four from three starting on Dec. 6.
Global prices of oil, Nigeria’s chief export, have dropped more than 20 percent this month. Traders now fear that the Nigerian central bank may not have enough reserves to defend the currency against a possible further weakening of oil prices as foreign investors have been pulling money out of Nigerian assets.
“With the approach of the yuletide season and the resultant increase in the demand for personal/business travel allowance, the CBN has … introduced a special intervention day every Thursday for $15,000 per BDC (bureau de change),” the bank said in a statement. Nigeria has been hit by dollar shortages since 2016. Traders say shortages could worsen towards year end as investors close their books, leaving the central bank as the main supplier of hard currency in the market.
The bank has been using up its dollar reserves to keep the naira stable, spending $2.2 billion in October to prop up the currency as foreign investors have also left the market in favour of rising interest rates in developed economies. The naira also weakened on the over-the-counter market on Thursday where it is traded by banks, while a unit fetched 306.80 on the official market – a stable rate at which the central bank has kept it for over a year through frequent interventions.
In addition to interventions, the bank has also been raising treasury yields to lure offshore funds. However, lower oil prices and the prospect of potentially fractious campaigns ahead of a Nigerian presidential election next year are deterring foreign investors, traders say. Reuters
Pix: Godwin Emefiele, CBN Governor