(Bloomberg) -- Nigeria’s currency sank to a record low after the central bank auctioned dollars at a naira rate that was almost 30% weaker than on the tightly controlled official market.
Faced with heavy demand from industries and importers for the greenback, the central bank of Africa’s biggest economy sold dollars at 645 naira apiece, adding to speculation that a devaluation may be in the cards after the inauguration of a new president last month.
In official trading on the Nigeria Exchange, the currency slipped as much as 0.7%, the most in almost six months before paring losses to 467.04 naira a dollar as of 2:40 p.m. local time — a record low.
Nigeria’s dollar earnings and reserves are dwindling and the government uses multiple exchange rates to manage supply and demand for foreign currency. Most residents who can’t get hold of the greenback on the main market or at auctions are forced to turn to black market trading where the naira is about 40% weaker.
Nigeria’s President Bola Tinubu announced plan to adopt a uniform exchange rate during his inauguration last month, part of a program to boost investments and grow the economy. Last week, the central bank denied a report that there was a steep decline in the official naira rate.
“The president has said we don’t need all those windows, so it’s a question of time for the currency to find its real value at the oficial trade,” Adetilewa Adebajo, economist and chief executive with Lagos-based CFG Advisory said by phone.
CFG Advisory expects the currency to trade at about 650 naira a dollar following a devaluation, Adebajo said. “When you have multiple rates or a static exchange mechanism it works against you.”
©2023 Bloomberg L.P.