Nume Ekeghe with agency report
Nigerian banks have started showing investors price quotes for the naira on their screens instead of giving them by phone, traders said.
The move is part of an effort to draw dollars back to the Nigerian economy, which has been short of dollars since the price of crude oil, the main source of hard currency, plunged three years ago, Reuters reported.
The central bank hopes the move would further narrow the spread between the official and black market rates by attracting more investment with higher transparency, traders said.
Market operator FMDQ Securities Exchange initiated the change with an email on Monday, citing the need to improve liquidity. Trading by phone will also continue, traders said.
“This will ensure rates distortion on the FX market are considerably minimised, serving to improve and maintain the credibility of the Nigerian FX market,” FMDQ said in the e-mail, adding that the move would start immediately.
A central bank official sits on the board of FMDQ.
Banks quoted the naira as weak as N371 to the dollar on the investor window on Thursday, Thomson Reuters data showed, but some were exchanging the dollar at N315 naira among themselves, traders said.
Investors exchanged the naira at N400 to the dollar in May.
The naira has recovered some ground in recent months as oil revenues improved, after reaching a record low to N520 to a dollar. On the official market, the naira ended Thursday at N305.55 to a dollar, the rate where the central bank has kept it through regular dollar sales since last August.
The central bank has been working to converge the rates through interventions, but the dollar sales are burning through its reserves.
In April it allowed investors to trade the naira at rates determined by the market, a move intended to improve dollar supply, but one that introduced yet another exchange rate.
The bank has said the investor window had handled $2.2 billion of trade since April. However, it accounted for almost 30 per cent of that trade itself as it worked to keep the window operating.
The central bank last year lifted a temporary peg on the currency, but to protect its precariously low foreign reserves it introduced a convoluted exchange rate system that sees different buyers paying various rates for dollars