The Central Bank of Nigeria (CBN) has weakened the naira marginally, selling the dollar at N307 for the first time on the official interbank market. To traders, this could signal a gradual move to merge the CBN’s multiple exchange rates.
Nigeria’s convoluted exchange rate system has been used to manage what the CBN described as “frivolous” demand for dollars at the peak of a currency crisis which began two years ago.
Nigeria now has at least five exchange rates, including the official one which the bank used to mask the pressure on the currency. In April, it allowed foreign investors to trade the naira at market determined rate, which has weakened the currency to around 360.
The bank has sold $500,000 almost daily on the official spot market since creating several exchange rates to alleviate dollar shortages. It sold the currency at between N305 and N306 for months before yesterday’s move.” It’s possible the central bank is working towards a gradual convergence of rates, one trader told Reuters.
Earlier this month, the bank sold the dollar at N306 for the second time after maintaining a level of around N305 on the spot market for two months.
Dollar shortages gripped Nigeria’s economy as crude sales, Nigeria’s mainstay, plunged at the start of an oil price rout in 2014. That triggered a recession last year and frustrated businesses, which had to find dollars on the black market as a result.