Nigeria suspends foreign exchange sales to retail currency traders

Nigeria's central bank has suspended foreign exchange sales to retail currency traders, a senior bureau de change (BDC) official said, to help protect the naira after a devaluation following the coronavirus outbreak and a fall in oil prices. The central bank last week moved the currency rate for BDC to 380 to the U.S. dollar from the previous 360. It subsequently adjusted the naira's official rate to 360, weaker than its previous peg of 306, implying a 15% devaluation.

Since the currency adjustment, the naira has weakened further. It fell to a new low of 361 to the dollar on the official market and hit 383.25 on the over-the-counter spot market on Thursday. Nigeria, which is Africa's biggest economy and its largest oil exporter, has confirmed 46 coronavirus cases, with one death. It has banned entry to arrivals from countries that have reported more than 1,000 coronavirus cases.

"Until borders are opened, there is no way anyone can provide genuine travel documents we can rely on," the BDC official said on Thursday, adding that some of the countries visited by Nigerians were in lockdown. "The implication is that the currency could weaken on the black market. If you stop the official source then the black market would thrive."

The naira came under pressure after oil prices fell following a disagreement between Russia and Saudi Arabia over a deeper production cut. The coronavirus outbreak has also hit global demand for oil. Quotes on the black market on Thursday were thin, with some dealers pricing the naira much weaker, above 400 to the dollar, closer to where the currency traded on the one-month forward market.

BDCs resell hard currency to individual users with dollar expenses such as medical bills and school fees abroad. However, with the lockdown the central bank assumes that currency demand for these expenditures should not exist, the official said. The central bank did not respond to a request for comment.

Prior to the latest move, the central bank had stepped up forex sales to the country's 5,000 retail currency operators, selling around $20,000 almost daily to shore up the naira. ($1 = 360.00 naira)

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