Nigeria’s central bank adjusted its exchange rate peg to N196.95 to the dollar from the 197 it set in February after the currency’s value was eroded by the fall in oil prices, data on its website showed yesterday.
The bank adjusted the rate at which it sold hard currency this week, dealers said, noting that the change was too small to be considered a revaluation for the naira, particularly in the face of dwindling foreign reserves.
Dealers said the central bank had been selling dollars to the inter-bank market at its adjusted rate. The naira was trading at 198.95 to the dollar on the inter-bank market and between 215 to 218 in the parallel market.
“By lowering the central bank rate offered to banks albeit very moderately, the central bank is adding to pressures on FX reserves … equivalent to around 4.9 months of imports,” Angus Downie, head of research at Ecobank said.
Nigeria’s foreign reserves fell to $29.4 billion by June 2, down 20.1 percent from a year ago as the central bank burns cash to defend the local currency. The bank merged its bi-weekly currency auctions market with the interbank market in February and fixed the exchange rate, a move that amounted to a de facto devaluation of the currency of Africa’s biggest economy.
The regulator had also banned commercial lenders from re-selling central bank dollars among themselves, which was an attempt to curb speculation on the naira. The naira Non-Deliverable Forwards – currency derivatives traded offshore – pointed to the local currency being priced at 221-225 to the greenback in six month’s time.
“Small changes in the rate could possibly allow the central bank to gauge the changes in demand and supply dynamics which would inform decisions on when and how best to start lifting forex restrictions,” Cobus de Hart of South Africa’s NKC Independent Economists aid.