The naira weakened for a fourth day after the central bank in Nigeria removed limits on how many dollars can be sold to foreign-exchange bureaus, driving demand for the U.S. currency.
The currency retreated as much as 1.6 percent to N163.21 per dollar, the lowest on an intraday basis since September 18, before trading 1 percent down at N162.30 by in Lagos, the commercial capital. Without intervention by the Central Bank of Nigeria, it may retreat to 165 per dollar this week, said Kunle Ezun, an analyst at Ecobank Transnational Inc. in Lagos.
The Abuja-based central bank removed the weekly limit of $250,000 that may be sold to a currency changer to “shore up liquidity in that segment of the foreign-exchange market,” it said in a statement on its website dated January 24. The central bank is concerned that a widening gap between interbank and bureaux de change rates may precipitate speculation, Governor Lamido Sanusi said January 21. In September, the bank banned imports of foreign currency by lenders without approval.
“BDCs are making more dollar demands on banks,” Ezun said by phone from Lagos. “Many banks on the other hand don’t have sufficient dollar liquidity as a result of central bank rule in September that banned the importation of cash without approval.”
Nigeria sells foreign currency at twice-weekly auctions to shore up the naira, which has dropped 3.7 percent since the start of 2013. The bank also sells dollars directly to lenders as sporadic intervals.