Dollar unavailability in Nigeria hinders import activities
Primary dealers are required to resell 70% of any dollars purchased from the central bank on the day of purchase therefore, the low volumes of the interbank currency market caused the naira to depreciate. Additionally, any redeal of dollars must be supported by a specific customer in order to prevent any currency speculation.
The Central Bank introduced currency reforms last month and stated that the naira would not be traded with any pre-determined spreads after it unpegged the exchange rate and allowed the currency to trade freely on the inter-bank market. However, thin liquidity has kept activity low and the central bank remains as the main supplier of hard currency.
On non-deliverable markets, the one-month naira-dollar forward was reported at 341 and one year contract descended to 351. The naira was also quoted at 365 per dollar in the black market on Monday. Meanwhile, according to the statistics office of the country, Nigeria’s annual inflation surged 16.5% in June when compared to May’s 15.6% level.
A plastic end product manufacturer operating in Nigeria underlined the above mentioned liquidity issues and the lack of US dollars and reported that they have not asked for import offers for this month. The buyer reported, “We fulfilled our needs from the local producer’s cargoes since the increasing parity is hampering import activity. We are trying to secure dollars since they are not readily available in the market. Meanwhile, demand for our end products is fine.”
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