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UPDATE 1-Nigeria weakens naira at retail FX auction in a move to align rates

Published 03/07/2020, 20:41
Updated 03/07/2020, 20:42
© Reuters.

(Adds details, background)
By Chijioke Ohuocha
ABUJA, July 3 (Reuters) - 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. But dollar shortages have plagued the economy after a
coronavirus-induced oil price crash slashed government revenues
and weakened its naira currency NGN=D1 , 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 NAFEX=FMDQ was quoted at 387.50 to the dollar
on Friday.

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