"Nigeria Lifts Interbank Foreign Exchange Trading Ban (Update2)
May 22 (Bloomberg) -- Nigeria lifted a ban on interbank foreign exchange trading after the local currency stabilized following a decline earlier in the year, Central Bank Governor Chukwuma Soludo said.
Trading in the foreign exchange market will gradually resume during the next three months, he said today at a briefing in the capital, Abuja. Banks will no longer be “required to sell dollars” to the central bank, and the Central Bank of Nigeria will participate in the interbank market, Soludo said.
“That’s a welcome development,” Bismarck Rewane, chief executive officer of Financial Derivatives Ltd., a Lagos-based fund manager, said by telephone from the Nigerian commercial hub. It marks a “return of the market to an imperfect market that it should be, rather than a monopoly.”
Nigeria banned interbank foreign currency trading to help shore up the naira, which has lost about 20 percent since Nov. 26, when the government let it weaken rather than defend the currency by running down foreign reserves. The West African nation currently has reserves of about $45 billion, Soludo said. Starting June 1, the central bank will also resume foreign exchange auctions on a twice-weekly basis, he said.
The currency of Africa’s largest oil producer has been trading at about 146 naira to the dollar since the central bank imposed trading restrictions three months ago.
On April 8, the central bank cut the benchmark interest rate by 175 basis points to 8 percent in order to ease liquidity, according to Soludo. A basis point is 0.01 percentage point.