The Central Bank of Nigeria (CBN) has directed banks to submit bids for a “special currency auction” targeting fuel importers to meet demand for matured letters of credit.
Traders said the central bank sent a message to banks on Monday to submit backlog dollar demand from fuel importers for a special intervention.
Nigeria consumes 45 million litres of gasoline a day, or roughly 280,000 barrels, which would require the market to provide some $18 million a day. Importers cover about 30 per cent of this, with the state oil firm covering the rest, which is a big strain on the market for dollars.
The West African nation has four refineries but decades of neglect mean it needs to import petroleum products. Fuel shortages often occur in Nigeria during festive periods such as Christmas and Muslim holidays.
Reuters quoted traders to have said the government wanted to ensure that fuel retailers had enough products, so it was channelling dollars to them and also to avoid shortages which in May crippled banking, airline and telecom services. Nigeria is in its deepest recession in 25 years, worsened by falling crude output as militants attack pipelines in the Niger Delta, the heart of its production, and global prices remain low, choking off dollars needed to fund imports.
The dollar shortage has caused many companies to halt operations and lay off workers, compounding an economic crisis. It was not clear at what rate the central bank would sell the dollars. In May, the government agreed a deal with oil firms in Nigeria to sell their dollars directly to fuel importers, to end months of scarcity partly caused by a currency shortage after it hiked fuel prices by 67 per cent, using an exchange rate of N285 per dollar.
The naira has been stuck at around N305 per dollar on the official market for more than two months since the central bank in June abandoned its dollar peg of N197 against the currency. It was quoted at N485 on the black market yesterday.