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The Central Bank of Nigeria Curbs Access to Foreign Currency

The Central Bank of Nigeria has curbed access to the interbank currency market for the purchase of foreign currency bonds as well as a range of goods to tighten liquidity and conserve reserves.

The bank said importers could no longer get hard currency from the interbank market to buy items such as rice, cement, private jets, other construction materials, plastic and rubber products, soap, cosmetics, furniture and Indian incense.

Analysts said the latest measures risked diverting dollar demand to the black market, worsening perceptions about economic policy and delaying a decision to devalue the naira.

The naira, which was trading at 198.50 on the interbank market, sold for 220 against the dollar at the black market in the commercial capital Lagos on Wednesday.

Currency and bond markets in Africa’s biggest economy have come under pressure since the price of oil, Nigeria’s main export, plunged. The Central Bank has spent $3.4 billion to prop up the naira since it fixed the exchange rate in February and tightened trading rules to curb speculation.

Officials of the bank met Chief Executives and treasurers from commercial lenders last week to discuss the impact of its policies on the foreign exchange market, but stopped short of announcing any decisions on how to make the naira more liquid.

In the meeting, the bankers suggested that the Central Bank should adopt a free-float regime in addition to raising interest rates to attract offshore investors back into bonds.

The central bank, which declined comment, has said in the past that floating the currency was not option.

JP Morgan has warned it might remove Nigeria from its Government Bond Index (GBI-EM) if it does not restore liquidity to currency markets in a way that allows foreign investors tracking its benchmark to trade with minimal hurdles.

In a similar move in April, the central bank limited the amount commercial bank customers can spend using their debits cards abroad.

One trader at a major commercial bank said that pent-up demand for dollars in Nigeria was about $4 billion.


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