CBN set to sell $500m currency auction as foreign reserves dip by 20.5%


As part of its effort to resolve chronic dollar shortage, the Central Bank of Nigeria is set to sell $500 million of two- and three-month currency forwards at auction today, Monday 31 to clear a demand backlog from manufacturers.

The CBN asked lenders to submit bids for the forwards before 1300 GMT, traders said. The bank held a two-month dollar forward auction two weeks ago in which it sold less than expected, traders said.

A lack of dollars has caused many firms to halt operations and lay off workers, compounding an economic crisis rooted in falls in the price of oil, which accounts for 70 percent of Nigeria’s budget revenues.

The economic crisis has kept the naira under pressure against the dollar, and the CBN has struggled to support the local currency with diminishing foreign exchange reserves.

Meanwhile, Nigeria’s foreign currency reserves fell 20.5 percent year-on-year to $23.95 billion by Oct. 27, down 2.7 percent month-on-month, central bank data showed on Monday.

The central bank has been selling dollars to support the weakening naira, hit by low oil prices that have triggered the first recession for 25 years.

According to traders there has been no activity on the bank interbank market, where the naira is quoted at N305 to a dollar, two hours after it opened on Monday. On the black market, the naira was quoted at 470.