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Nigeria says multiple FX rates have eliminated “frivolous” demand – Reuters

HomeNewsNigeria says multiple FX rates have eliminated “frivolous” demand – Reuters
Nigeria says multiple FX rates have eliminated “frivolous” demand – Reuters
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    Alex Ikechukwu
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By Oludare Mayowa

LAGOS, April 27 (Reuters) – Nigeria’s central bank has eliminated “frivolous demand” for foreign currency by introducing a multiple exchange rate system and has been intervening on the spot and forward markets to boost liquidity, its spokesman said on Thursday.

Isaac Okorafor said the multiple exchange rates was aimed at improving dollar supply while allowing investors to trade their own dollars at a more market-determined rate.

On Monday the bank said it would allow market forces to set exchange rate for portfolio investors, a move intended to attract foreign investors that fled the country at the start of the latest currency crisis.

The move introduces yet another exchange rate to the five existing ones. Still, analysts doubt its sufficient to draw inflows into Africa’s biggest economy as it masked pressure on the naira with the regulator trying to avoid a devaluation.

The naira traded at 305.85 to the dollar on the official interbank market on Thursday and 390 on the black market. It was quoted at 379.89 on investors’ window.

The central bank has been intervening aggressively on the spot and forward markets to prop up the naira. On Thursday it offered $63 million to exchange bureaus at 360 to the dollar and auctioned another $100 million in forwards, traders said.

Analysts doubt whether it can sustain these sales.

On the non-deliverable forwards market the naira was quoted at 412 to the dollar in 12 months’ time. and at 387.33 on the futures market settled in local currency.

The International Monetary Fund has urged Nigeria to scrap its multiple exchange rate regime to revive its economy, which is in its second year of recession. (Additional reporting and writing by Chijioke Ohuocha; editing by John Stonestreet and Pritha Sarkar)


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