Nigeria's naira shot firmer on the country's black market on Thursday as traders prepared for the central bank to increase the dollar supply to exchange bureaux to keep the official retail rate higher.
The black market rate strengthened 2.6 percent to 385 naira to the dollar.
The central bank plans to sell $20,000 each to bureaux de change operators on Thursday, the operators' association president, Aminu Gwadabe, told Reuters. It sold $20,000 each earlier this week to boost liquidity.
The bank has sold around $4 billion since it started its aggressive intervention on the currency market in February, analysts say, doubting whether it could sustain the trend.
"Until we see a freely traded naira a la Egypt, Nigeria is fighting with one hand tied behind its back," said Aly-Khan Satchu, head of Nairobi-based Rich Management.
The central bank, opposed to a naira float, has been intervening on the official market to try to narrow the currency's spread with the black market rate. On the official market, the currency was quoted at 306 per dollar.
The spread has become far narrower thanks to central bank intervention. It was 520 to the dollar on the black market in February after the bank devalued the naira for retail customers to 375.
February's move effectively created multiple exchange rates, including official, black market and one to pay for foreign school fees.
Finance Minister Kemi Adeosun said liquidity was improving on the currency markets on dollar injection, thanks to rising oil prices, adding that government was harmonising fiscal, monetary and trade policies to boost growth.
"Higher oil prices alone are insufficient to explain the central bank's aggressive interventions over the past few weeks and (oil) production seems to have ramped up slowly over the first quarter of this year," said Cobus de Hart, senior economist at NKC in Johannesburg.
"Whether the central bank used funding such as external debt related inflows to intervene in the forex market remains to be seen, but in general we are not convinced that the regulator will be able to sustain this trend indefinitely."
Nigeria has raised a total of $1.5 billion in Eurobonds in the first quarter of this year.
Gwadabe said the increase in currency sales to exchange bureaux would help take out pressure from the black market, adding that some importers were no longer bringing forward dollar demand as liquidity continues to improve.
On Tuesday, the bank cut the amount of paperwork small and medium-size businesses must provide to buy dollars, also among to improve liquidity and attract them away from the black market.