Nigeria’s currency, the Naira hit fresh lows against the dollar on the parallel market on Friday, after a government liquidity injection to help cash-strapped states offset a funding crisis hit the currency, traders said.
The currency of Africa’s biggest economy fell to a new record low of 240 on the parallel market, down 2.1 percent on the day, as persistent dollar shortages continued, two traders said.
Aminu Gwadabe, president of Nigeria’s Bureau de Change association said he saw an increase in demand on Friday as individuals tried to convert their naira to dollars.
The government on Tuesday said it will pay out $2.1 billion to reduce a growing backlog of debts and restructure short-term loans owed by its states after declining oil prices cut revenues.
“There is a lot of demand with the recent injection of cash by the government. Part of the funds is being converted to dollars,” Gwadabe told Reuters.
Before the liquidity injection, the naira has weakened steadily on the black market.
The central bank two weeks ago tightened access to dollars on the official interbank market, which analysts say risked diverting demand to the unofficial black market, worsening investor perceptions about policy.
On the interbank market, the naira traded at 199.45 at 1037 GMT on Thursday, near central bank’s pegged rate of 196.95.
On Thursday, the bank said it would not be focusing on the thinly-traded parallel market when determining the exchange rate, adding that people preferred to use the unofficial market for undocumented transactions.