Picture: THINKSTOCK
Picture: THINKSTOCK

LUANDA — A foreign exchange law in Angola has halved the value of dollars auctioned by the central bank since June as the country considers letting its currency trade on international markets, a central bank official said.

The Banco Nacional de Angola said the amount sold at auctions has fallen to $200m a week from $400m in June, before oil companies were required to pay some suppliers in kwanzas, the local currency, Antonio Andre Lopes, a vice-governor of the bank, said last week

Angola, Africa’s second-largest oil producer after Nigeria, passed a law last year that may funnel $25bn annually through the $116bn economy by having required foreign-owned oil companies including Chevron and Exxon Mobil to pay taxes in kwanzas from May, and domestic suppliers in the currency from the beginning of last month.

The measure has boosted the supply of kwanzas in Angola’s market, Mr Lopes said. "There’s a high supply of foreign currency with the oil companies obligated to pay in kwanzas after exchanging dollars at the banks," Mr Lopes said. "We’re in a process of de-dollarisation of the economy."

While a date has yet to be selected, the law is a step towards allowing free trade in the kwanza, Mr Lopes said. "There is some pressure to make the kwanza a traded currency," he said. "We need to think about the impact this will have on stability."

The kwanza is being used informally in neighbouring Zambia and Democratic Republic of Congo, generating some demand for international trading, he said. The value of the kwanza, backed by the oil law, will lead to a "fully tradeable" currency as soon as central bank governor José de Lima Massano "sees the market is ready and the kwanza is respected", said Pedro Coelho, CEO of the Angolan unit of South Africa’s Standard Bank, last week in Luanda.

"Things are not stabilised," João Fonseca, executive director of Banco Angolano de Investimentos, said on Friday. "Banks now have excess of dollars due to the new phase of the foreign exchange oil law."

Exercising monetary policy by selling Treasury Bills, regulating the supply of foreign currency in the market and adjusting reserve ratios at banks has helped to stabilise the exchange rate, Mr Lopes said. The kwanza is little changed against the dollar this year.

The bank has kept its benchmark interest rate at 10% since January, while commercial bank rates are about 5%-6% higher, he said. Angola pumped 1.76-million barrels of oil a day last month, almost entirely from offshore Angolan fields.

Bloomberg