(Adds quote, FX reserve, background)
By Chijioke Ohuocha and Oludare Mayowa
LAGOS Feb 6 The naira dropped to a record low
of 500 to the dollar on the black market on Monday, even though
Nigeria's foreign reserves rose to their highest in a year, as
demand for the U.S. currency grew and the central bank rationed
dollar supply, traders said.
The naira has been hovering near the 500 level for the past
two weeks. On the official market, it has been quoted at 305.25,
where it has been trading since last August.
Last week the central bank sold $660 million in three- and
five- month currency forwards at an auction aimed at clearing a
backlog of dollar demand. But traders say that was not enough to
satisfy the market.
On Monday, central bank data showed its foreign exchange
reserves have been rising, though they remain far from their
peak of $64 billion in August 2008. The reserves had climbed to
a one-year high of $28.28 billion by Feb. 2.
"Despite rising FX reserves, it's the amount of FX that is
supplied that matters. The parallel market, by its nature, is
particularly sensitive to demand-supply imbalances, and has a
tendency to overshoot," said Razia Khan, head of Africa research
at Standard Chartered Bank.
"Supply of FX matters more than any other factor."
Traders say the central bank has been selling dollars on the
official market to support the naira, but dollar shortages were
causing the Nigerian currency to weaken on the black market.
The government has been pressing retail currency operators
to narrow what it says is a damaging gulf between the naira's
official rate and the unapproved open retail market.
The naira lost a third of its official value against the
dollar in 2016 after the central bank scrapped its peg for the
currency, allowing the naira to float on the interbank market,
in a bid to alleviate dollar shortages.
(Editing by Larry King)