The Nigerian naira fell by 1.09% to 460 naira on the black market on Monday after the president last week told the central bank to stop dollar sales for food and fertiliser imports.

President Muhammadu Buhari on Thursday directed the central bank to stop selling foreign exchange for those imports, similar to an order issued last year. Nigeria faces its worst economic crisis in four decades triggered by an oil price crash induced by the novel coronavirus pandemic. The crisis has slashed government revenues, weakened the currency and created large financing gap for Africa’s biggest economy.

The naira had firmed sharply two weeks ago on the black market after the central bank resumed dollar sales to individuals and investors to try to clear demand. But sales have not being enough, traders say, with pressure piling up on the currency. The country has spent 16.6% of its dollar reserve from last year to $35.77 billion.

Dollar liquidity dried up on the spot market after foreign investors dumped Nigerian assets following the oil price crash. However, a central bank’s forex sales have also been inadequate. Volumes on the spot market, widely quoted by foreign investors and imports, declined from a peak of $1.3 billion in February to a low of $3.9 million last month.

On the official market supported by the central bank, the naira traded at 381 to the dollar, while it was quoted at 385.83 naira on the spot market on Monday.

“It doesn’t help that some … pronouncement … will likely send more demand to (black) market,” one trader said. “These developments put more pressure on the parallel market rates, particularly in the midst of very little supply.”  Reuters