Nigeria in record forex sale
In remarks to Reuters, Charles Soludo, governor of the Central Bank of Nigeria, said that the action was intended "to shore up the foreign exchange market, to reduce the premium in the interbank and official rate, and also as a liquidity mop-up strategy."
He also said that the sale, which was in addition to the regular twice-weekly auctions, would be repeated if necessary.
The sale comes ahead of reforms in the foreign exchange market expected next year, when banks will be able to bid directly for bulk purchases of foreign exchange, rather than having to collate and pass on requests from clients as at present.
The current arrangements mean that demand for dollars at the official exchange rate is not fully met by the central bank, and the premium in the black market for dollars is around 8 percent.
Inflation in Nigeria is running fairly high, at 16.7%, well above the official target. One cause of this is excess liquidity in the banking system, and the sale of foreign currencies in exchange for naira will help address this. Following the sale, the currency also strengthened against the dollar.
The central bank has ample foreign exchange reserves if it wishes to repeat the exercise, as a result of recent high oil revenues.
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