Nigeria’s central bank asked lenders to bid for forex at an auction 5% above its official rate of 360, traders said, in a move to weaken the naira as the regulator seeks to unify its multiple exchange rates.
The central bank said last week it will work towards the gradual unification of exchange rates across all forex windows. It has operated a multiple rate regime which it has used to mask pressure on the naira and to absorb the impact of lower oil prices. [nL8N2E12S8]
But dollar shortages have plagued the economy after a coronavirus-induced oil price crash slashed government revenues and weakened its naira currency, funnelling demand to the black market where the naira is trading much weaker at 450 per dollar.
The central bank, Nigeria’s main supplier of dollars, depreciated the forex rate for retail interventions to 380 to the dollar from a previous rate of 360, traders said, quoting a message from the regulator to lenders.
The bank wants to unify rates to conserve its dwindling foreign exchange reserves which lost $8.5 billion to sit at about $36 billion in May due to an increase in imports from last year and demand from investors exiting Treasury bills.
With the rate move, the central bank has moved its retail auction for importers and individuals closer to the over-the-counter spot market widely quoted by investors and where the naira was quoted at 387.50 to the dollar on Friday.