Nigeria’s central bank sold dollars to importers at 8% lower than its official rate for the currency, according to analysts.
(Bloomberg) — Nigeria’s central bank sold dollars to importers at 8% lower than its official rate for the currency, according to analysts.
The Central Bank of Nigeria in “secondary market intervention sales auctions” sold the greenback in exchange for about 500 naira, according to Samir Gadio, head of Africa strategy at Standard Chartered Bank. That compares with an official rate of 461.23 naira against the dollar for investors and exporters as of 8.53 a.m Friday in the commercial capital of Lagos. The naira has been falling for 12 weeks, its longest loosing streak on record.
Africa’s largest economy operates a multiple exchange regime — dominated by a tightly controlled rate — for different official transactions. Supply of foreign-exchange is rationed, which drives demand to the unauthorized market where the naira is 61% weaker. It traded at about 744 to the dollar on Thursday, according to Abubakar Mohammed, an operator of a bureau de change that tracks the data.
A central bank spokesman didn’t immediately respond to queries.
Nigeria’s foreign-exchange rates:
- A rate for investors seeking to repatriate local currency earnings and exporters
- Another for small businesses and other companies seeking to import raw materials
- Separate rate for the budget and crude export earnings
International organizations including the the World Bank and the International Monetary Fund have called for a merger of the rates by allowing more flexibility in the official window.
Africa’s most populous nation holds presidential election next month and all the three leading candidates including the ruling All Progressives Congress nominee Bola Ahmed Tinubu have promised to end the multiple exchange rate system if elected, as they seek to improve market transparency and encourage inflows.
Eleven investors and economists out of 13 polled by Bloomberg in December forecast that the central bank will devalue the naira after the election with median estimate forecasting it to weaken the currency to as low as 533 per dollar.
“The market expects the NAFEX fixing to rise this year,” Standard Chartered’s Gadio said, referring to the rate for importers. “But the pace could be gradual in the coming months, especially around the elections and before the large naira-futures May contract matures.”
(Updates naira in second paragraph)
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.
