Market News

By Emele Onu

(Bloomberg) -- Nigeria’s central bank is offering dollars to money changers and is capping the rate at which they can sell the US currency to close the widening values in the official and parallel markets. 

The Abuja-based Central Bank of Nigeria offered to sell $20,000 to each bureau de change operator at 1,450 naira each, and ordered that traders aren’t allowed to sell the greenback at more than 1.5% above the purchase rate, the lender said in a statement on Thursday.  

The central bank noted “distortions in the retail end of the market, which is feeding into the parallel market and further widen the exchange-rate premium,” adding that the foreign-currency sales — which are targeted at meeting demand for invisible transactions —will help end the distortions.

The announcement triggered 2.5% gain for the naira on the streets of Lagos, the commercial hub, as it exchanged at 1,600 per dollar at 3 p.m. compared with 1,640 earlier in the day, Abubakar Muhammed, chief executive of Forward Marketing Bureau de Change Ltd. — which compiles the data — said by phone. 

The appreciation curbed the spread with the official rate of 1,581 naira a dollar to 1.2% from 3.6%.     

Africa’s most populous nation has battled years of acute foreign-exchange scarcity, resulting in multiple exchange rates and the exit of foreign investors. When he took office last year, President Bola Tinubu allowed the currency to trade freely to narrow the exchange-rate gap and lure inflows. 

Recent policy changes including clearing a backlog of unmet dollar demand helped to bridge the gap to mostly 2% — before this week’s spike — from 20% in May.