With just a few days to Christmas, the value of the naira which began a decline at the weekend further weakened yesterday, selling at N490 to the dollar the highest in recent times even as the Central Bank of Nigeria plans to clear backlog of dollar obligations in a special currency auction.
The naira which had stabilized at N485 to the dollar for weeks sold weaker at N487 last weekend before further declining to N490 yesterday. The weakening of the local currency is due to rising demand for foreign exchange fueled by increased activities ahead of end of year festivities.
Meanwhile, the apex bank had yesterday asked banks to submit bids for a “special currency auction” to clear the backlog of matured outstanding dollar obligations for selected sectors of the economy according to traders.
The CBN instructed commercial banks to submit backlog dollar demand from fuel importers, airlines, raw materials and machinery for manufacturing firms and agricultural chemicals for a special forex intervention.
Nigeria is in its first recession in 25 years, caused by low global oil prices which have cut the supply of dollars needed to fund imports. Attacks by militants on pipelines in the oil-rich Niger Delta since January have reduced crude output, reducing dollars earned.
The dollar shortage in the OPEC member, whose crude sales make up two thirds of government revenue, has caused many companies to halt operations and lay off workers, compounding the economic crisis.
Traders said the central bank plans to sell “funded forwards of two to five months tenor” dollars to the targeted sectors at an auction ahead of the closure of the forex market for the year.