Nigerian Naira Firms After Rule Change

The Nigerian naira firmed against the dollar, banking sources said, after the rules governing foreign exchange auctions at the central bank were changed.

The marginal rate set at today’s auction, from which reporters were barred for the first time since the sessions began last September, was 3.7001 to the dollar compared with 4.0002 at the last session on March 19, the sources said.

Under the new system unveiled on March 20 and in operation for the first time today, bidding banks must pay for foreign exchange at the rate they bid, rather than as previously at the rate of the lowest successful bid.

The measure was aimed at discouraging banks from bidding high and thus driving down the naira’s value. But banking sources and other analysts said demand for foreign exchange remained sharply higher than the available funds.

Henceforth the sessions will be held every fortnight, instead of weekly, and today only 80 mln dlrs was on offer compared with the 50 mln dlrs usually on sale each week.

The rule change appeared to have an immediate impact on bids. Today’s highest bid was 4.06 to the dollar, compared with a top bid of 4.25 two weeks ago.

Banks who bid higher than the marginal rate will be able to pass on their rate to their customers, while the marginal rate will only act as a marker for transactions.