How CBN’s policy move pushed Naira to free fall on black market

Nigeria’s naira tumbled to record low of 860 per dollar on the black market on Thursday, as the central bank’s plan to replace old notes next month with new ones spurred demand for foreign currencies, traders said.

Traders said the central bank policy, announced last week, had led to a particular surge in politicians converting cash as campaign spending builds ahead of elections in February.

The naira was trading on the back market at almost double the rate in the official market, where it fetched 446 per dollar.

“We have seen the naira devalue since the central bank’s announcement,” one trader said, adding the bank had also weakened the naira in its interventions and sold fewer dollars.

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“That’s what is driving the black market.”

Access Bank, one of Nigeria’s leading lender, said in a notice it would limit the amount of dollars it can sell to individuals in payments abroad and that it would now take longer to fill requests, in a sign a worsening dollar liquidity.

The country’s anti-graft police said it had raided exchange bureaus in Abuja, Lagos, and Kano and made some arrests, a spokesperson for the Economic and Financial Crimes Commission (EFCC) said. It did not say who was arrested or why.

In the past, the anti-graft agency has conducted raids in search of currency speculators and hoarders, who it says are responsible for artificially weakening the naira.

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President Muhammadu Buhari, who will not be running in presidential elections due to term-limits, has backed the central bank’s policy.

The central bank has switched from a loose monetary policy to support weak economic growth to a tight policy to counter inflation that has hit its highest since 2005.

It has said the amount of naira outside the banking system was making policy less effective.

With Reuters report

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