The Central Bank of Nigeria (CBN) on Monday asked banks to submit bids for a “special currency auction” to clear the backlog of matured outstanding dollar obligations for selected sectors of the economy, traders said on Monday.

The central bank instructed commercial lenders to submit backlog dollar demand from fuel importers, airlines, raw materials and machinery for manufacturing firms and agricultural chemicals by 1500 GMT for a special forex intervention.

Nigeria is in its first recession in 25 years, caused by low global oil prices which have cut the supply of dollars needed to fund imports. Attacks by militants on pipelines in the oil-rich Niger Delta since January have reduced crude output, reducing dollars earned.

The dollar shortage in the OPEC member, whose crude sales make up two thirds of government revenue, has caused many companies to halt operations and lay off workers, compounding the economic crisis.

Traders said the central bank plans to sell “funded forwards of two to five months tenor” dollars to the targeted sectors at an auction ahead of the closure of the forex market for the year.

The central bank is expected to close all foreign exchange transactions this Friday ahead of its financial year end and the Christmas period.

The naira currency has traded around 305.5 naira to the dollar on the official interbank market since August, while it was quoted at 487 to the dollar on the parallel market on Monday.

Two weeks ago, the bank had asked commercial lenders to submit bids for a special intervention auction targeting fuel importers, but the result of the auction has not yet been released, traders said.

Africa’s largest economy has suffered from an acute shortage of jet oil used by airlines in the last few months, causing many operators in the sector to refuel from neighbouring countries, while flight cancellations by local airlines have become commonplace as a result of the shortages.

On Monday, the Nigerian National Petroleum Corporation said it had imported about 38.7 million litres of aviation fuel, which it said “represented about 26-day sufficiency”, as part of its “ensure a hitch-free air travel across the country during and after the yuletide period.” (TV360 Nigeria)

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