The Naira slumped by the most in at least a year on the black market after banks announced restrictions to international spending on Naira cards. The move by banks has been widely interpreted as a sign of Nigeria’s worsening Dollar crunch and is likely to pile further pressure on the black market rate.

The Naira on the black market weakened by 0.4 percent to N472/$ as of noon Tuesday from N470/$ Monday, according to data from AbokiFx, which collates rates from street traders. This is around 2 percent weaker than the rate at the start of the month.

In a move reminiscent of a strategy adopted in 2016 in the wake of the collapse in crude oil prices, Nigerian banks like Zenith and Stanbic IBTC have reduced the amount of money that can be spent abroad on the Naira cards to around $200 and $500 per month, depending on lender.

With demand backlog building up and few Dollars to go around, Nigerians are forced to patronize the parallel market for both transactional and speculative ends.

Governor Godwin Emefiele on Monday said the moves to devalue the Naira from N360/$ to N382/$ will result in better Dollar inflow and cut supply leading to an appreciation of the Naira.

Foreign investors are however constrained by their inability to exit their positions in the economy due to low Dollar liquidity, a situation that is also affecting Dollar inflow into the economy.

“The CBN is yet to fully intervene in the market. The strategy of the CBN is to conserve the reserve as much as possible till the global economy balances,” said Olaolu Boboye, economist at CSL Stockbrokers Ltd. “If today the CBN comes to supply FX to all the investors in the orderly manner it promised, outflows will increase but investors’ confidence will be back that the Nigerian economy is liquid.”

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