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Nigeria naira eases on black market after order to ban FX for food imports

Published 14/09/2020, 17:14
© Reuters.

ABUJA, Sept 14 (Reuters) - The Nigerian naira NGNFX=BDCN
fell by 1.09% to 460 naira on the black market on Monday after
the president last week told the central bank to stop dollar
sales for food and fertiliser imports.
President Muhammadu Buhari on Thursday directed the central
bank to stop selling foreign exchange for those imports, similar
to an order issued last year. Nigeria faces its worst economic crisis in four decades
triggered by an oil price crash induced by the novel coronavirus
pandemic. The crisis has slashed government revenues, weakened
the currency and created large financing gap for Africa's
biggest economy.
The naira had firmed sharply two weeks ago on the black
market after the central bank resumed dollar sales to
individuals and investors to try to clear demand.
But sales have not being enough, traders say, with pressure
piling up on the currency. The country has spent 16.6% of its
dollar reserve from last year to $35.77 billion.
Dollar liquidity dried up on the spot market after foreign
investors dumped Nigerian assets following the oil price crash.
However, a central bank's forex sales has also been inadequate.
Volumes on the spot market, widely quoted by foreign
investors and imports, declined from a peak of $1.3 billion in
February to a low of $3.9 million last month.
On the official market supported by the central bank, the
naira NGN=D1 traded at 381 to the dollar, while it was quoted
at 385.83 naira NAFEX=FMDQ on the spot market on Monday.
"It doesn't help that some ... pronouncement ... will likely
send more demand to (black) market," one trader said. "These
developments put more pressure on the parallel market rates,
particularly in the midst of very little supply."

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