LAGOS Dec 29 Nigeria's central bank sold about
$1 billion on the forward market last week to clear a backlog of
dollar obligations in selected sectors, traders said on
Thursday, its largest special auction since a currency peg was
removed in June.
Outstanding dollar demand was about $4 billion before June,
when the 16-month-old peg was removed. Efforts to cut dollar
demand have been largely unsuccessful due to low oil prices.
Crude sales account for about 90 percent of Nigeria's
foreign exchange earnings.
Traders said the central bank told banks to prioritise
airlines, manufacturing firms, petroleum products importers and
agriculture sectors, the sectors worst hit by the dollar
shortage, in the auction.
"The central bank sold $1 billion at last week's special
forex auction and directed banks to issue fresh letters of
credit to reflect the amount sold in favour of the affected
sectors," a senior currency trader told Reuters.
Traders said the central bank sold 30-day and 60-day
forwards at the auction.
On Dec. 19, the central bank instructed commercial lenders
to submit their backlog of dollar demand from fuel importers,
airlines, raw materials and machinery for manufacturing firms
and agricultural chemicals for the special forex
Nigeria is in its first recession for 25 years, caused by
the oil price drop which has cut the supply of dollars needed to
fund imports. Attacks by militants on pipelines in the Niger
Delta since January have cut crude output, further reducing
The dollar shortage in the OPEC member, whose crude sales
make up two thirds of government revenue, has caused many
companies to halt operations and lay off workers, compounding
the economic crisis.
Some foreign airlines have closed down or reduced their
operations over an inability to repatriate the proceeds of their
earnings due to the dollar shortage.
An acute shortage of jet oil in the last few months - caused
by the inability of importers to secure the dollars needed to
buy the fuel - has led to many operators refuelling in
Flight cancellations by local airlines have become
commonplace as a result of the shortages.
The naira was trading at about 305.25 to the dollar on the
interbank market on Thursday and was quoted at 490 a dollar on
the unofficial market.
(Editing by Alexis Akwagyiram and Louise Ireland)