Nigeria’s central bank weakened the naira for the third time this year as the regulator struggles to stem demand for dollars amid lower than anticipated foreign-currency inflows.
The Abuja-based central bank adjusted the rate licensed bureau de change operators can sell the local currency to 392 naira per dollar from 386 naira previously, it said in a circular to dealers on Monday. Traders will purchase the U.S. currency at 390 naira from 384 naira, and international money transfers will be exchanged at the banks at 388 naira per dollar from 382 naira.
The devaluation follows two, in March and July, as Africa’s largest oil producer contends with lower-than-budgeted crude prices, along with the economic turmoil that followed the global coronavirus pandemic. Nigeria has experienced a significant drop in foreign-exchange inflows as oil as exports account for more than 90% of the country’s foreign-exchange earnings.
“Oil prices didn’t recover strongly as many had anticipated with the reopening of the economies,” Mosope Arubayi, the chief economist at Lagos-based Vetiva Capital Management Ltd., said by phone. The depreciation “basically signifies some pressure on CBN right now,” she said, referring to the central bank.
The low greenback liquidity at the official exchange window, where the central bank maintains a largely inflexible rate, has increased demand in the parallel market where the rate is freely determined.
The naira traded at 500 versus the dollar on Monday, its lowest since Feb. 22, 2017, according to abokifx.com, a website that collates parallel market data. The rate is 22% weaker than the current official rate of 390.89 per dollar.
The central bank also directed banks to pay dollars to the beneficiaries of remittances from abroad via international money transfer operators to boost supply of the U.S. currency. Recipients were paid the naira equivalent previously.