Nigeria Central Bank Relaxes ‘Currency Crashing’ Trading Rules

Nigeria Central Bank Relaxes ‘Currency Crashing’ Trading Rules

Written By Paul Wallace and Emele Onu  | From Bloomberg

Nigeria’s central bank loosened rules implemented last month on buying and selling foreign exchange that were blamed for crushing currency trading in Africa’s largest economy.

The maximum net open foreign-exchange trading positions banks can hold at the end of each business day was increased to 0.1 percent from zero, the Central Bank of Nigeria, based in the capital, Abuja, said in a notice on its website dated yesterday. Banks have 72 hours to use dollars bought in the interbank market before they must sell them back to the institution, up from 48 hours previously, it said.

Nigeria, which produces the most oil of any African country, tightened rules on foreign-currency trading as the naira slumped and crude prices plunged. The central bank raised interest rates to a record 13 percent in November to stem outflows and Finance Minister Ngozi Okonjo-Iweala proposed cutting this year’s budget by 8 percent. Interbank trading dried up last month after the bank introduced the tighter rules.

The revision “will increase by a little the ability of banks to fund transactions as they can hold dollars for longer,” Pabina Yinkere, head of research at Lagos-based Vetiva Capital Management Ltd., said by phone. “There’s not going to be a dramatic boost to trade.”

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