Paul Wallace London
Nigeria’s central bank loosened rules for buying and selling the weakening naira that were implemented last month and blamed for crushing foreign-currency trading in Africa’s largest economy.
The maximum net open foreign-exchange trading positions banks can hold at the end of each business day was increased to 0.1 percent from zero, the Central Bank of Nigeria, based in the capital, Abuja, said in a notice on its website dated on Monday. Banks have 72 hours to use dollars bought in the interbank market before they must sell them back to the institution, up from 48 hours previously, it said.
Nigeria, which produces the most oil of any African country, tightened rules on foreign-currency trading as the naira slumped and crude prices plunged.
Tighter rules
The central bank raised interest rates to a record 13 percent in November to stem outflows and Finance Minister Ngozi Okonjo-Iweala proposed cutting this year’s budget by 8 percent. Interbank trading dried up last month after the bank introduced the tighter rules.
The revision would not lead to “a significant change in market liquidity”, analysts at Zenith Bank UK said.
The naira weakened as much as 1.8 percent before paring the decline to trade 0.4 percent lower at 182 per dollar by 10.44am in Lagos, the commercial capital. While the currency is up 0.8 percent this year, it fell 10 percent in the past three months, the most among 24 African currencies.
The regulator reduced the daily foreign-exchange positions for banks from 1 percent of shareholders’ funds in December to stop speculation against the naira, Governor Godwin Emefiele said on January 6. – Bloomberg