Nigeria's naira hit a new low on the black market on Wednesday and the head of the bureau de change association urged its members to help stabilise the currency, the continued weakness of which has become a "major concern" for the central bank. The naira was quoted at 507 to 510 per dollar on the black market, traders said, much weaker than the official market closing rate of 305.50, which it has been trading at since last August.
"The growing spikes in the parallel market to over 500/$ is becoming a major concern to the central bank ... and detrimental to the cordial relationship existing between us and regulators," Aminu Gwadabe told bureau de change association members. The central bank normally sells around $8,000 a week each to some 3,000 licensed retail operators, who resell to individuals and small businesses for a marginal profit.
While these operators account for less than 5 percent of all foreign currency trading in Nigeria, they help drive the currency's exchange rate due to the scarcity of dollars on the official channel. However, they have tended to buy dollars from private sources and resell at a much higher margin, fuelling the black market but weakening the naira.
Gwadabe urged his members to stick to the reference rate of 399 naira per dollar set last month to stabilise the currency market and reduce the 40 percent gap with the official inter-bank rate. The naira's official exchange rate weakened by a third last year, and the currency has continued to hit fresh lows on the black market since last week, crossing the 500 line on the unapproved retail market as traders tested new levels to lure dollar holders to sell.
Gwadabe told his members to comply with the reference rate to enable them to benefit from "more volumes soon to be communicated by the central bank". The government has been pressing retail operators to narrow what it has described as a damaging gulf between the official and parallel exchange rates.