Nigeria Central Bank Cuts Flow of Dollars to Money Changers

Updated on
  • Money-changers will have to get FX from other sources
  • Central bank also ended a six-month ban on dollar deposits

Nigeria’s central bank stopped selling foreign exchange to money-changers as it struggles to stabilize the naira amid a plunge in oil prices that have hit government finances.

“Operators in this segment of the market would now need to source their foreign exchange from autonomous source,” Central Bank of Nigeria Governor Godwin Emefiele said in an e-mailed statement on Monday. “They must however note that the CBN would deploy more resources to monitoring these sources to ensure that no operator is in violation of our anti-money laundering laws.”

Emefiele, 54, also lifted a ban on foreign-currency deposits, ending a six-month embargo on banks from receiving dollar deposits from customers.

Nigeria, Africa’s largest oil producer, is struggling to cope with crude oil prices that have fallen to below $35 a barrel. Oil accounts for two-thirds of government revenue and about 90 percent of its foreign currency earnings. The ban is the latest in a series of controls by the central bank to support the naira that has been all but fixed since February at 197-199 per dollar.

The local unit was unchanged at 199.05 naira versus dollar at the interbank market as of 1:30pm in Lagos. Three-month non-deliverable forwards rose 4.3 percent to 250.50 naira against the US currency, its record high on a closing basis.

‘Rent Seeking’

Money-changers have become avenues for “rent-seeking” with the number of operators rising from 74 in 2005 to 2,786 currently, Emefiele said.

“The naira will be devastated by the ban,” said Aminu Gwadabe, president of the Lagos-based Association of Bureau de Change Operators of Nigeria.“The naira is going to depreciate further; toward the end of this week we might see it reach 300 naira per dollar” on the unofficial parallel market, he said.

The currency traded at 285 per dollar on the streets on Tuesday compared with 278 naira on Monday, according to Usman Onoja, the chief executive officer of Lagos-based Lovonus Bureau de Change Ltd.

The Association of Bureau de Change Operators of Nigeria will hold an emergency meeting with its members and will request talks with central bank officials, Gwadabe said by phone on Monday.

(Updates with forwards in 5th paragraph, black market rate in 8th.)