CBN mops $338mn from banks before weakening naira

The Central Bank of Nigeria (CBN)  collected N122 billion ($338 million) from banks with excess cash before weakening the currency at a retail auction last week Friday, in a move to unify its multiple exchange rates, bankers told Reuters.

Monetary authorities offer multiple foreign-exchange rates, which are imposed to manage dollar demand after oil prices crashed. The central bank, Nigeria’s main forex supplier, asked lenders to bid for dollars at N380 to the dollar on Friday, five per cent above its official rate.

The naira, however, opened weaker at N387 against the dollar on the over-the-counter spot market widely quoted by investors and importers. It further weakened to N462 naira at the black market on Monday.

The currency has come under pressure in recent months after the coronavirus pandemic and a fall in price of oil, Nigeria’s main export, and as foreign investors exited, leaving the country with a large financing gap.

The oil price crash has caused dollar shortages on official markets, shifting demand to the black market, where the naira is much weaker. Central Bank Governor Godwin Emefiele has said he would not unify rates close to the black market rate.

The bank has been withdrawing liquidity from the financial system before forex auctions, part of measures to support the currency and curb speculation, bankers say.

Money market rates spiked to 25 per cent following the debit, from just under two per cent the previous session, bankers said.

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