Nigeria’s naira weakened to a record 345 to the dollar on the parallel market on Monday, increasing pressure on the government to devalue the official exchange rate to narrow the gap and spare Nigerians from huge bills for imported goods.
The local currency eased 1.47 percent from Friday’s close of 340 to the dollar, while the official rate remained at 197.50 to the dollar at the close of trading on Monday.
Traders said the black market rate had slipped as Nigerians with school and medical bills to pay abroad anticipated the central bank would stop allocating currency for such payments. The bank has not denied or confirmed any such plans.
Tumbling global oil prices have battered Africa’s top crude exporter, with foreign exchange reserves down to an 11-year low at $27.85 billion by Feb. 11.
Nigeria’s government is concerned that further depreciation will hurt poor Nigerians, but the bank’s refusal to revise the pegged exchange rate has widened a chasm between official rates and the parallel market.
But, Aminu Gwadabe, chairman of Association of Bureau de Change Operators of Nigeria has a word of advice for the authorities : “In my own view, the central bank should address the supply side of the market by allowing oil companies and banks to sell dollar to bureau de change operators as an immediate measure to reduce pressure on the naira”.
Last month, Nigeria’s central bank halted dollar sales to non-bank foreign exchange operators and allowed commercial banks to accept dollar deposits, in a failed effort to shore up dwindling foreign reserves.
Nigeria earns around 90 percent of its foreign exchange earnings from crude oil exports, but mismanagement of its refineries means it must also import expensive refined fuel, eating deep into its reserves.
*First published by Reuters.