Currency hits post-peg black market low of 400

Nigeria's naira hit 400 against the dollar on the black market on Friday, bureaux de change traders said, falling to its lowest since the central bank floated the currency in June.

The naira has dropped steadily on the black market this week after opening at 381 on Monday. Traders say dollar demand has been high from individuals travelling abroad for their summer holidays.

The central bank has told international money transfer operators to pay dollar proceeds from customer transfers into local commercial banks in naira, while selling the dollars themselves to bureaux de change outlets.

The bank hopes the move will help narrow the gulf between the official and black market rates and boost dollar liquidity, traders say.

It had hoped that the need for a black market would be erased by scrapping the dollar peg and thereby attracting foreign investment.

But dollar liquidity remains thin and has curbed interbank activity, despite the central bank hiking interest rates last week and mopping up naira liquidity to shore up debt yields.

Some past suppliers of dollars, including oil firms, are now selling some of their hard currency directly to petrol importers under an arrangement with the government, traders say.

Other foreign players have stayed out of the market, traders say, after exiting the equities and bond markets in the wake of the plunge in crude prices in mid-2014, until Africa's biggest economy show signs of stabilising.

Before the central bank pegged the naira at 197 to the dollar in Feb 2015, the interbank market had traded daily volumes of over $100 million.