• Central Bank governor initially said would pick 10 dealers
  • Nigeria’s naira to be floated Monday after 15 month dollar peg

Nigeria will loosen rules on which banks are eligible to become currency dealers with the central bank when it floats the naira from Monday, in a bid to boost foreign-exchange trading, according to the chief executive officer of Ecobank Transnational Inc.

Central bank Governor Godwin Emefiele said he would probably pick as many as 10 dealers when he announced a new foreign-exchange policy on June 15, with each handling minimum volumes of $10 million in the spot market and $5 million in the futures and forwards markets. The regulator opted to allow more of Nigeria’s 21 commercial banks to become dealers following a meeting with lenders in Abuja on June 17, according to Ade Ayeyemi.

“They don’t want a situation in which some players are excluded,” Ayeyemi said by phone on Saturday from Lome, Togo, where Ecobank is based. “They want most players who apply to be given authorization. Over time, that may change” as the naira stabilizes and dealers are required to make bigger transactions with the central bank.

Nigeria has held the naira at 197-199 per dollar since March 2015, spending about $2.7 billion of its reserves, 9.3 percent of the total, defending the peg this year alone. That was even as other oil exporters devalued their currencies amid a slump in crude prices by more than half since 2014 to around $50 a barrel. Capital controls imposed by Emefiele sent foreign investors fleeing and caused manufacturers, who struggled to pay for imports, to cut thousands of jobs.

Ecobank, which operates in more than 35 African countries and has its biggest subsidiary in Nigeria, has been authorized as a primary foreign currency dealer, Ayeyemi said. He said the naira will probably start trading at around 250 against the dollar on Monday, before falling to 280.

“It could even go beyond that,” he said. “The pent up demand will drive the rate weaker pretty quickly. But that will lead to supply of dollars picking up and the rate stabilizing.”

Like other bankers and analysts, he expected the central bank to introduce a heavily managed exchange rate when it dropped the peg, rather than a free float.

“This is a very good move,” he said. “It takes Nigeria into territory it’s never been in before. There will be short term pain. We just encourage the government that this short term pain will bring better days ahead. The overall economy will benefit.”

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