Nigeria to sell dollars to clear demand backlog

Nigeria’s central bank plans to sell an undisclosed amount of dollars on Tuesday to settle a backlog of foreign exchange demand for airlines, fuel and raw material imports, traders said.

Traders said the central bank had asked commercial lenders to submit bids for dollars to cover the previously unmet demand for hard currency for specific sectors as it tries to improve dollar liquidity and ease pressure on the naira.

“Banks shall not allocate funds for customers LCs (letters of credit) – that have already benefited from past special market intervention sales (SMIS) that are yet to mature,” the central bank was quoted as saying in a circular.

Africa’s largest economy, grappling with a currency crisis brought on by low oil prices which have hammered its foreign reserves and created chronic dollar shortages, has resorted to regular injections of dollars by the central bank to narrow the spread between the official and black market rates.

It has sold more than $4 billion to various sectors of the economy since the central bank started intervening on the official market in February. Currency traders say this has increased liquidity and helped to ease pressure on the Naira.

The naira was quoted at 381.31 per dollar at the investor window on Tuesday, according to the market regulator FMDQ OTC Securities Exchange.

Commercial lenders were yet to put up a quote on the official interbank market by 1216 GMT, but the naira closed at 305.25 a dollar on Monday on the market, while it was quoted at 381 a dollar on the black market.

The naira has firmed on the black market from its record low of 520 to the dollar in February, before the central bank’s intervention in the foreign exchange market. (Reuters)