Naira fell on Monday and bid-ask spreads widened as the local spot currency market struggled with a scarcity of U.S. dollars, traders said.

One dealer at a top-tier bank quoted the naira at 395-402 per dollar in the over-the-counter market from 392-394 naira in the previous session. Others quoted the naira at 397.21 to the dollar.

Traders said few deals were executed between banks as rising demand for dollars from importers and foreign investors seeking to repatriate funds piled pressure on the naira.

Nigeria’s currency has been losing ground on spot and derivatives markets, mirroring weakness on the black market, where it trades more freely.

The naira dropped to a record intra-day low last week on the spot market and has been quoted at 480 naira to the dollar on the black market since last month, against the official rate of 381 naira, set in July and backed by the central bank.

The central bank nearly doubled open-market Treasury yields last week to lure investors after revising its futures contracts upwards. The move pushed up rates on the forwards market.

The bank adjusted the exchange rate last year, after an official devaluation in March, in an attempt to align multiple quoted currency rates. But the naira has continued to weaken.

The International Monetary Fund on Monday called on Nigeria to adopt a gradual and multi-step approach to establishing a unified and clear exchange rate in order to clear a backlog of payments.

Reuters