Naira strengthened to its strongest level in street trading since at least April as supplies of U.S. currency surged ahead of an auction set for next week by  central bank.

The local unit traded 440 naira per dollar on Tuesday from a peak of 477 naira last week, according to abokifx.com, which collates rates from street traders in Lagos, the nation’s commercial hub. In the official spot market, the unit weakened 0.1% to 385.78 naira per dollar as of 4.30pm on Tuesday.

The parallel rates drifted 5% weaker than the official rate of 380 naira from March after the central bank suspended dollar sales to bureau de change operators as Africa’s most populous country went on lockdown to contain the spread of coronavirus.

Central Bank of Nigeria said it will resume sale of foreign currency to traders on September 7 as the lockdown eases and international flights resume, increasing the demand for the greenback by businesses and leisure travelers. CBN plans to sell at 384 naira to a dollar to dealers, who will then sell at 386 naira to end users.

Panic Move

Many dealers who kept hoards of foreign currency are releasing them “to the market because they don’t know where the price will settle on Monday,” Mr Aminu Gwadabe, president of Association of Bureau de Change Operators of Nigeria, said by phone. “They are dumping, people are not willing to buy.”

CBN is struggling to clear a backlog of foreign-exchange demand by foreign investors taking their profit and locals seeking imports. The backlog was exacerbated by the outbreak of Covid-19 and the slump in the price of crude, which accounts for more than 90% of the nation’s foreign exchange earnings and more than a half of government revenue.

Bloomberg