Naira falls as foreign reserves fall

Nigeria’s forex reserves, Friday, fell to a two-week low as the naira eased on the black market.

Reuters news agency reports that the development came after the central bank pledged to step up dollar sales but also said it would announce a new currency rate for retail exchange bureaus next week.

The central bank had on Tuesday set a rate of 362 naira for exchange bureaus to sell the U.S. currency to consumers, an 11 percent rise in the local currency from the last setting in January.

The apex bank, which opposes a free naira float, has been selling the U.S. currency on the official market to try to narrow the spread with the black market rate, which was quoted at a record low of 520 per dollar a month ago.

On Friday the black market naira, which has firmed 17 percent since last month due to central bank dollar sales on the official market aimed at narrowing the spread, eased 1.8 percent to 390 naira.

The naira held its level at 306.35 to the dollar after the central bank sold $1.5 million on the spot market.

The central bank said late Thursday it would increase the amount it offers to exchange bureaus to $10,000 per member from $8,000 but would announce a new rate on April 3.

Traders say the new rate announcement had created uncertainty and caused the naira to trade weaker on the black market. Dollar buffers have, however, started to decline.

Nigeria’s dollar reserves, which have risen 16.1 percent since the start of the year, stood at $30.29 billion by March 29, but are still far off their peak of $64 billion, hit in August 2008, the Central Bank of Nigeria, CBN, data showed.

The International Monetary Fund, IMF, on Thursday urged Nigeria to lift its remaining foreign exchange restrictions and scrap its system of multiple exchange rates in order to revive its economy, which is in its first recession in 25 years.

Traders estimate that the CBN has sold more than $1 billion in currency forwards since last month to boost liquidity.