Nigeria fixes naira at 198/dollar in de facto devaluation

Nigeria's central bank scrapped its bi-weekly currency auctions on Wednesday and a market body said it would sell dollars only at 198 naira, unveiling a de facto devaluation of the currency of Africa's biggest economy and top oil producer.


FMDQ, a group comprising Nigeria's main commercial banks and the central bank, said commercial banks had also been banned from re-selling central bank dollars among themselves, another attempt to end speculation in the naira.

The currency has lost more than 20 percent in the last three months due to the collapse in oil prices and concerns about political stability after the six-week postponement of a Feb. 14 presidential election.

The auctions, known in Nigeria as RDAS, accounted for only 10 percent of FX transactions and the decision to abandon them amounted in real terms to the central bank ditching its 160-176 target band against the dollar, said Segun Agbaje, chief executive of GT Bank and a director of FMDQ.

"Yes, we will move the band," Agbaje said. "If demand in RDAS is only 10 percent, really the devaluation has happened."

Under the new rules, banks will only be able to purchase foreign exchange if they have a prior order from a corporate customer, such as a fuel importer or foreign mobile phone company looking to repatriate profits or dividends.

Any outstanding dollar demand at the end of each trading day will be met by the central bank at 198, FMDQ vice chairman Jubril Aku told a news conference.

"Starting from Friday the interbank market is order-based - essentially filling orders of customers," he said.

In a statement, the central bank did not stipulate the level at which it would sell dollars to the interbank market, but said it would continue to intervene "to meet genuine/legitimate demands".