Nigeria's central bank holds special forex auction

Nigeria's Central Bank recently held a special forex auction to tackle the backlog of dollar demand from manufacturers. The move comes at a time when the country is facing a severe dollar shortage, with some banks even restricting the use of their cards abroad. Nnamdi Nwizu, Co-Managing Partner of Commercio Partners, joined CNBC Africa to provide insights into this significant development. Nwizu acknowledged the worsening dollar situation and highlighted the signal sent by banks withdrawing from the system, paving the way for the Central Bank's intervention. The special auction aimed to address the growing demand for dollars, particularly focusing on sectors like manufacturing and airlines. The selective allocation of forex has been a topic of debate, with concerns raised about selling dollars below market rates. As the parallel and black market rates diverge, questions arise about the Naira's true value and the possibility of devaluation. Nwizu emphasized the need for convergence between the different markets to attract foreign investors back to the country. The impact of the special auction on the fixed income markets was also discussed, with expectations of a spike in rates following the announcement. Looking ahead, Nwizu highlighted the uncertainty around the volume of dollars to be sold and its implications on liquidity. The Central Bank's next move will be crucial, especially if a significant portion of the backlog is cleared, providing room for more flexibility in the market. Overall, the efforts to address the dollar shortage through special auctions and selective allocation reflect the ongoing challenges facing Nigeria's foreign exchange market.