Nigerian banks have started showing investors price quotes for the country’s currency, the naira, on screens instead of giving them by phone, traders said.
The move is part of an effort to draw dollars back to the ailing Nigerian economy, which has been short of dollars since the price of crude oil, the main source of hard currency, plunged three years ago.
The central bank hopes the move will further narrow the spread between the official and black market rates by attracting more investment with higher transparency, traders said.
Market operator FMDQ Securities Exchange initiated the change with an email on Monday, citing the need to improve liquidity. Trading by phone will also continue, traders said.
“This will ensure rates distortion on the FX market are considerably minimized, serving to improve and maintain the credibility of the Nigerian FX market,” FMDQ said in the email seen on Thursday, adding that the move would start immediately.
A central bank official sits on the board of FMDQ.
Banks quoted the naira as weak as 371 to the dollar on the investor window on Thursday, Thomson Reuters data showed, but some were exchanging the dollar at 315 naira among themselves, traders said. Investors exchanged the naira at 400 to the dollar in May.
The naira has recovered some ground in recent months as oil revenues improved, after reaching a record low to 520 a dollar. On the official market, the naira ended Thursday at 305.55, the rate where the central bank has kept it through regular dollar sales since last August.
Nigeria had at least five exchange rates which it has used to mask pressure on the naira. The bank has been working to converge the rates through interventions, but the dollar sales are burning through its reserves.
In April it allowed investors to trade the naira at rates determined by the market, a move intended to improve dollar supply, but one that introduced yet another exchange rate.
The bank has said the investor window had handled $2.2 billion of trade since April. However, it accounted for almost 30 percent of that trade itself as it worked to keep the window operating.
The central bank last year lifted a temporary peg on the currency, but to protect its precariously low foreign reserves it introduced a convoluted exchange rate system that sees different buyers paying various rates for dollars. (Editing by Ulf Laessing, editing by Larry King)