Nigeria’s central bank plans to sell dollars at a retail auction next week to ease pressure on the local currency and stem a foreign exchange rout, according to the regulator.
The sale follows “growing unmet foreign exchange demand” which has “continued to increase the demand pressure in the foreign exchange market, with adverse impact on the exchange rate of the naira,” the Abuja-based Central Bank of Nigeria said in a circular to lenders.
It called on authorized dealer banks to provide a list of all outstanding FX demand by end users. “The CBN will undertake a Retail Dutch Auction System to mitigate the demand for eligible transactions,” it said. The reintroduced retail forex auction will take place on Aug. 7, the central bank said.
The naira has come under pressure through seasonal demand from summer tourism as well as businesses seeking the greenback to bring in goods in the import-dependent nation. The currency weakened 2.9% to 1,617 a dollar on Friday, according to latest data from FMDQ, as compiled by Bloomberg. It has declined about 70% over the past year, following reforms to allow it trade freely and lure inflows.
The central bank in the past carried out retail and wholesale currency auctions to supply dollars to the market. While it sold dollars directly to customers using the retail auction instrument, it sold to banks through the wholesale auction.
– Bloomberg
