Naira drops to record low as traders await CBN’s FX auction

Nigeria’s naira currency dropped to a record low of 465 per dollar on Monday, data from Refinitiv showed.

That’s as traders await the outcome of Friday’s (March 31) central bank foreign exchange auction. The naira later recovered to trade at 461 to the dollar.

Soaring inflation and an unstable currency have been hampering Africa’s biggest economy as it tries to recover from the global health crisis.

The naira has fallen to successive lows due to dollar scarcity coupled with central bank adjustments to manage a backlog in demand for foreign exchange.

On Friday, the central bank held a bi-weekly retail auction for people or businesses who need dollars to settle offshore trade-related obligations.

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The results are expected this Friday (April 7).

Traders expect unsuccessful bidders to Friday’s auction to channel their demand to informal sources.

That prompted the naira to weaken to N750 against the dollar on the parallel black market.

Nigeria’s central bank is battling to manage liquidity on the interbank market while at the same time intervening on the foreign exchange market to prop up liquidity.

It’s been adjusting rates to manage demand against its level of foreign reserves.