Nigeria’s naira hits record low on official market after FX auction

Nigeria's naira hits record low on official market after FX auction
© Reuters. FILE PHOTO: A person holds a new 1000 Naira note as the Central Bank of Nigeria releases the notes to the public through the banks in Abuja, Nigeria, December 15, 2022. REUTERS/Afolabi Sotunde

By Chijioke Ohuocha

ABUJA (Reuters) – Nigeria’s naira dropped to a record low of 465 per dollar on the official market on Monday, Refinitiv data showed, as traders await the outcome of Friday’s central bank foreign exchange auction.

The naira, which trades within a range on the official market, has fallen to successive lows due to dollar scarcity, coupled with central bank’s adjustments to manage a backlog demand for foreign exchange.

It later recovered to trade at 461 to the dollar.

The central bank on Friday held a bi-weekly retail auction for people or businesses who need dollars to settle offshore trade-related obligations. The result of the sale are expected this Friday.

The naira weakened to 750 against the dollar on the black market as traders expect unsuccessful bidders at Friday’s auction to channel their demand to informal sources.

“In this quarter, the (central bank) may be willing to raise levels at which they want to intervene on the market,” one trader said, referring to the rate hike.

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

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

Nigeria’s president-elect Bola Tinubu and his administration – due to be sworn in in May – will be faced with soaring inflation and an unstable currency which has hampered Africa’s biggest economy as it tries to recover from the COVID-19 pandemic.

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