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CBN auctions dollar at N645, weaker than spot rate of N465 on Friday

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The Central Bank of Nigeria (CBN) sold the dollar at N645 at its latest auction, results showed on Friday, lower than the N465 at which the currency is trading on the official secondary market.

Nigeria operates multiple exchange rates, which the central bank has used to manage demand, mask pressure on the naira, and conserve its dwindling reserves. The system has fueled a black market, trading sharply lower than the spot rate.

The bank held its latest biweekly auction on May 26. In April, it auctioned dollars at N630 to endusers.

The naira has weakened faster at the central bank’s auctions than on the spot market, leading many analysts to believe that a devaluation could match the rate traded at the auctions.

On Thursday, the central bank denounced news of a devaluation of the currency after the media reported a big fall in the value of the naira following speculation over the outcome of a meeting new President Bola Tinubu had with the central bank governor, Godwin Emefiele this week and as the naira is already sold weaker at auctions.

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Tinubu told governors from his ruling All Progressives Congress )APC) in Abuja on Friday that the country’s multiple exchange rates would be streamlined. “We will not have multiple exchange rates anymore,” he said.

The central bank has been adjusting the value of the naira gradually on the spot market to avoid a large-scale devaluation. Former President Muhammadu Buhari, who was in power for eight years, viewed a strong currency as a matter of national pride.

Meanwhile, the naira traded on the I&E FX market at N464.67 to the dollar on Friday, according to the details of the transaction at the official market.

A report from the FMDQ showed that most participants maintained bids between N460.00 and N467.00 per dollar.

A chief executive of a multinational told Global Financial Digest that many manufacturing companies buy dollars at a higher rate than projected at the I&E window.

The CEO said while they get around one percent of their demand at the official rate, for companies that are willing to buy more, the regulatory bank is willing to sell at higher rate which is closer to the parallel market rate.

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