Naira depreciates by 30% as CBN appoints 15 banks as FX primary dealers

By Odunewu Segun

The naira has slumped 30 per cent against the dollar on Monday after the Central Bank of Nigeria officially removed its currency peg in an effort to alleviate foreign currency shortages in the country.

As part of this measure, the apex bank sold $530 million for 280 naira per dollar at a special auction and later sold a further $86.5 million directly on the interbank market at 281 to 285 naira.

The naira had traded just twice by midday, before the central bank held its special auction to clear a backlog of hard currency orders. Less than $1 million had changed hands, prompting an extension of the trading day to 5 p.m. (1600 GMT), dealers said.

Black market currency dealers were quoting the naira at 325 to 345 naira to the dollar, up to 10 percent stronger than on Friday, on expectations more hard currency liquidity on the interbank market would reduce demand on the street.

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According to the Central Bank, there is the need to inject more foreign exchanged into the interbank market to increase liquidity and reduce a backlog of $4 billion backlog of demand, which could take four weeks to clear.

“We suspect that the best way to talk about the new exchange rate regime is still as a managed float, but a managed float that is responsive to market forces,” Citi analysts said in a note. “The new structure does provide a platform for the CBN (central bank) to easily step further away from the market.”

Meanwhile, the Central bank of Nigeria has rescinded its decision to appoint ten FX primary dealers, and instead announced 15 of its commercial lenders as primary forex dealers.

Some of the appointed dealers according to National Daily investigation are: Stanbic IBTC Bank, Standard Chartered Bank, Citibank, Zenith Bank, Access Bank, UBA, Sterling Bank, FCMB.