Naira volatility spurs Nigerian firms to seek exchange rate band
Nigerian producers want the central bank to set a trading band for naira to help stem weakness in the currency and reduce the impact on manufacturing costs.
The Manufacturers Association of Nigeria, a industry body, said limited dollar liquidity and high exchange rate costs had weakened industrial production since currency reforms were announced in June.
“Despite the recent reform to unify all forex windows, the exorbitant premium that persists between the official and parallel exchange rates have further stalled manufacturing operations,” it said in emailed report on Wednesday. “The short-term remedy will require managing the floating exchange rate system.”
The government in mid-June allowed the currency to depreciate as part of measures to attract inflows and help revive the economy. The naira weakened as much as 40% in the official market. While it and the parallel market rate initially converged, the gap has since widened as a shortage of dollars prompted a surge in demand for foreign currency.
The naira was at 767.21 per dollar on the official market on Wednesday compared with 920 in parallel trade.
Deputy Governor Kingsley Obiora had indicated that the central bank wouldn’t allow a fully free float.
“No central bank’s forex intervention will be effective without boosting the level of liquidity and transparency,” the producers group said.
