Nigeria’s central bank barred foreign-exchange bureaus from buying U.S. dollars through commercial banks, its latest move to contain the damage a collapsing currency and sinking oil prices are doing to Africa’s biggest economy.
Nigeria’s naira currency hit a fresh all-time low beyond 191 to the dollar on Thursday after the bank informed the country’s 2,500 licensed foreign-exchange dealers they could only buy dollars at its own auctions. The bank said the move aimed “to curb speculative demand in the market” or to prevent people from rushing to procure dollars as the naira declines.
But economists and traders said lumping exchange bureaus together with professional currency traders could have the opposite effect. The central bank’s aim is to limit people’s ability to trade naira for dollars while sentiment is against the Nigerian currency; making dollars harder to come by might make them even more desperate to do so, said Salisu Garu, who operates a foreign exchange bureau in the capital, Abuja. “The policy will further devalue the naira,” he said.
Traders have turned against the naira as global oil prices have plummeted, betting that Africa’s top crude producer would struggle to replace the revenue it uses to fund 80% of its budget. The naira has fallen more than 15% over the last six months, tracking a more than 50% decline in the price of oil over the same period.
Nigeria’s central bank has struggled to craft an effective response.
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