ABUJA — Nigeria’s central bank is worried about boosting dollar supply on the currency market and not valuation of the naira, its director of monetary policy Hassan Mahmud said on Tuesday.
The naira hit a record low of 532 to the dollar on the unofficial or black market on Monday, with dollars hard to come by following the central bank’s recent actions to channel demand from the unofficial market, where the naira is trading at much lower levels.
“We are not really bothered much about valuation. What we are worried about is the supply side and the confidence in the system,” Mahmud told a virtual investor conference.
Nigeria is battling dollar shortages brought on by low oil prices following disruptions linked to the COVID-19 pandemic. The central bank has devalued the currency three times since March 2020, but the naira has continued to weaken.
In June, Central Bank Governor Godwin Emefiele, said Nigeria’s spot naira rate was overvalued by up to 10%, citing the bank’s real effective exchange rate model.
Mahmud said the level of the naira is expected to adjust based on demand but that market failures had made the bank adopt a managed float regime.
Nigeria has several exchange rates operating in parallel, a system put in place during a 2016 oil price crash because the government was seeking to avoid a large official devaluation of the naira as a matter of national pride.
Mahmud said the spot rate is the reference rate and that he expected a convergence of Nigeria’s several exchange rates, a gap which has frustrated investors.
On Tuesday, the naira traded at 411 per dollar on the official spot market, in the range of 407 to 412 naira where it has been since June. (Reporting by Chijioke Ohuocha; Editing by Jon Boyle, Emelia Sithole-Matarise and Jane Merriman)