Nigerian naira strengthened to its strongest level in informal trading since at least April as supplies of the U.S. currency surged ahead of an auction set for next week by the central bank.
The local unit traded 440 naira per dollar on Wednesday from a peak of 477 naira last week, according to abokifx.com, which collates rates from street traders in Lagos, the nation’s commercial hub. In the official spot market, the unit weakened 0.4% to 387.15 naira per dollar as of 8.53am on Wednesday.
The parallel rates went 5% weaker than the official rate of 380 naira when the central bank suspended dollar sales to bureau de change operators in March, widening as much as 20% at a point, as Africa’s most populous country went into lockdown to contain the spread of coronavirus.
The Abuja-based Central Bank of Nigeria said it will resume sale of foreign currency to traders on Sept. 7 as the lockdown eases and international flights resume, increasing the demand for the greenback by businesses and leisure travelers. The central bank plans to sell at 384 naira to a dollar to dealers, who will then sell at 386 naira to end users.
Many dealers who hoarded foreign currency are releasing it “to the market because they don’t know where the price will settle on Monday,” Aminu Gwadabe, president of the Association of Bureau de Change Operators of Nigeria, said by phone. “They are dumping, people are not willing to buy.”
The central bank is struggling to clear a backlog of foreign-exchange demand by foreign investors taking their profit and locals seeking imports. The shortage was exacerbated by the outbreak of Covid-19 and the slump in the price of crude, which accounts for more than 90% of the nation’s foreign exchange earnings and more than half of government revenue.