Nigeria’s money-changers will introduce an exchange rate for the naira to help the central bank combat unregulated trading.
Licensed dealers, known as bureaux de change, or BDCs, will post an exchange rate each Monday on their website from Jan. 16 to “highlight positive rate development in the market” and counter domains such as abokifx.com, which publishes unofficial prices daily, Aminu Gwadabe, the head of the local BDC association, told reporters in Lagos.
Trading in the black market boomed since 2014 after the central bank strengthened capital controls and began to manipulate the interbank exchange rate as oil, the country’s top export, plummeted. With foreign-exchange shortages mounting, Nigerian businesses have been forced to the black market, where each dollar trades for about 490 naira, compared with the official rate of 315. The BDCs will initially quote a rate of 399, Gwadabe said.
While the naira has plummeted almost 40 percent since central bank Governor Godwin Emefiele in June ended a 15-month peg to the dollar, traders say it’s still being managed by the government. President Muhammadu Buhari, who meets Emefiele regularly, likened devaluation to “murder” last year.
“The federal government and the Central Bank of Nigeria have stood their ground for a very long time by not allowing the naira to float freely,” Gwadabe said.
Nigerian officials have already tried to rein in the black market. In November, intelligence agents threatened to arrest any BDC operator or street-trader buying or selling the naira at a rate weaker than 400 per dollar.
The measures will probably fail unless Nigeria loosens its grip on the official market, according to NKC African Economics.
“Their options are fairly limited, and allowing for more flexibility in the official exchange rate represents the best strategy to bring forex demand and supply forces closer to equilibrium, and as such, narrow the gap between the dual exchange rates,” Cobus de Hart, an analyst at Paarl, South Africa-based NKC said in a note to clients.