26 December 2014, Lagos – The Central Bank of Nigeria says the post-devaluation band for the naira is “appropriately priced”, but black market hawkers are trading it at around three to five per cent below its floor in the run-up to Christmas.
Despite an eight per cent devaluation of the target band and efforts last week to crack down on currency speculation by squeezing liquidity, the naira remained at record lows on Thursday, Reuters reported.
While the central bank and the interbank markets argued over the naira’s fair value, experts noted that it was harder to argue with the price on the streets where many dollars were being bought and sold.
The CBN had devalued the naira and widened its target trading band to 160-176 against the dollar, but few analysts believed this could hold, given a steady decline in reserves.
Several street changers, mostly Muslim northerners from the Hausa and Fulani ethnic groups told Reuters they were trading a dollar for N180-N182 the day before Christmas.
Last week, when the naira hit a record low, it was sold at N190 to the dollar, some 6.5 per cent below the lower end of the bank’s target band.
“The naira has come back a bit because people want more of it now ahead of Christmas,” said Ibrahim Sanni, standing by a palm-lined Lagos hotel adorned with Christmas decorations. “Last week, we bought at N190, lower than ever.”
But he added that trading had been very slow since the end of November when the central bank devalued the currency.
The naira has been hit hard in recent months by a steep fall in the price of Nigeria’s main export, oil.
The CBN last week introduced new policies banning banks from holding their own funds in dollars and decreeing that dollars bought from the interbank market could be held only for up to 48 hours.
Trading has been slow and almost come to a halt since the measures were introduced.
The rise in the dollar in heavily import-dependent Nigeria has caused pain ahead of the Christmas shopping season, with small-scale retailers saying sales were badly hit.
“Even in Christmas week, they aren’t buying,” said Bola Maja, 40, who runs a clothes shop in Lagos.