Nigeria offers dollars to FX dealers to close gap in currency rates
TLDR
- Nigeria's central bank introduces measures to narrow the gap between official and parallel market values by offering dollars to money changers.
- Central Bank of Nigeria sells $20,000 per bureau de change operator at 1,450 naira per dollar, limiting the selling rate to 1.5% above the purchase rate.
- Aimed at addressing market distortions, the initiative targets invisible transactions to reduce exchange-rate premium.
Nigeria’s central bank is offering dollars to money changers and capping the rate at which they can sell the US currency to narrow the gap between the official and parallel market values.
The Central Bank of Nigeria, based in Abuja, has offered to sell $20,000 to each bureau de change operator at 1,450 naira per dollar. It has mandated that traders cannot sell the greenback at more than 1.5% above the purchase rate, according to a statement from the central bank on Thursday.
The central bank cited “distortions in the retail end of the market, which is feeding into the parallel market and further widening the exchange-rate premium.” It added that the foreign-currency sales, aimed at meeting demand for invisible transactions, will help eliminate these distortions.
Key Takeaways
Africa’s most populous nation has struggled with acute foreign exchange scarcity for years, leading to multiple exchange rates and the exit of foreign investors. Upon taking office last year, President Bola Tinubu allowed the currency to trade more freely to narrow the exchange-rate gap and attract foreign inflows. Recent policy changes, including clearing a backlog of unmet dollar demand, had helped to reduce the gap to around 2% — down from 20% in May — before a recent spike. The latest announcement from the Central Bank of Nigeria led to a 2.5% gain for the naira on the streets of Lagos, the commercial hub, with the currency trading at 1,600 per dollar at 3 p.m.
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