Nigeria’s central bank plans to
boost dollar sales for school fee payment and travel abroad so
as to reduce the premium paid on the black market and support
the naira, a senior banker said on Saturday.
The naira is quoted on the black market at a discount of
around 40 percent to the official interbank market, where it has
closed at 305 to the dollar since last August.
The regulator met with senior bankers at an industry event
on Friday to discuss ways to address dollar shortages on the
official market, one banker who attended the meeting told
Reuters late on Saturday.
The CBN disbursed $2.83 billion to critical sectors of
the economy in December and January. However, analysts estimate
outstanding dollar demand at around $4 billion.
The bank has been trying to clear the backlog via forward
contracts sold to manufacturing, agriculture and airline
companies, hoping also to help drag Nigeria out of its worst
recession in 25 years, triggered by low oil prices.
But retail currency users have been left out, fuelling the
black market. On Friday, the naira hit a new low of 516 to the
dollar on the unofficial market.
“Individuals have been complaining of not getting dollars,”
the banker said. He said the outcome of the meeting with the
central bank was that dollars would be sold to them at the rate
used by international money transfer firms – around 375-380
naira.
In Nigeria, retail currency users buy dollars from licensed
bureaux de change (BDC). However, due to the central bank’s
inability to meet dollar demand, BDCs have tended to source
dollars from private sources and resell at a much higher margin.
The bank normally sells around $8,000 a week each to some
3,000 licensed retail operators.
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While these operators account for less than 5 percent of
foreign currency trading in Nigeria, they help drive the
exchange rate due to the scarcity of dollars on the official
channel.
The central bank, under pressure from the government, has
been pressing retail operators to narrow the gulf between the
official and parallel exchange rates.
The banker said it was agreed at the meeting that
individuals would be required to present their tax certificate
before buying dollars, in a bid to dampen demand and also boost
tax coverage.
Analysts expect the central bank to allow greater
flexibility on the currency this year.
“We think the most probable outcome of an FX policy
adjustment is a managed float, possibly a new peg, but a full
float is unlikely,” Yvonne Mhango, economist at Renaissance
Capital wrote in a note to clients.
Mhango said a rise in Nigeria’s foreign reserves since
November could help the bank make the adjustment at a level at
which it can support the currency. She forecast a year-end
interbank rate of 447 naira per dollar.
Reuters
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