Nigeria’s Central Bank says the post-devaluation band for the naira is “appropriately priced”, but black market hawkers out on the street are trading it at around 3-5 percent below its floor in the run-up to Christmas.
Despite an eight percent devaluation of the target band and efforts last week to crack down on currency speculation by squeezing liquidity, the naira remains at record lows.
But while the CBN and the interbank markets argue over the naira’s fair value, it’s harder to argue with the price on the streets where many dollars are bought and sold.
Nigeria devalued its currency and widened its target trading band to 160-176 against the dollar, but few analysts believe that can 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 180-182 naira the day before Christmas.
Last week, when the naira hit a record low, they were trading at 190 to the dollar, some 6.5 percent below the lower end of the bank’s target band.
“The naira’s come back a bit because people are wanting 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 190, lower than ever.”
But he added that trading has 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.
Nigeria also introduced new policies last week banning banks from holding their own funds in dollars and decreeing that dollars bought from the interbank market can be held only for up to 48 hours. Trading has almost ground 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.