Birr Wobbles While Central Bank Whispers as Young Banks Break the Old Rules

Apr 19 , 2025.

Key Takeaways:

Touting what they call an “all-time high” stock of foreign exchange reserves, officials of the National Bank of Ethiopia (NBE) unleashed firepower to steady the Birr (Brewed Buck). They may not reveal the exact figure, yet central bankers insist the cushion is real. On April 17, 2025, they ran their fifth currency auction since August, offering 70 million dollars. Twenty-nine banks chased the dollars, a sign of the squeeze facing an economy short on imports, flush with inflation, and starved of cash.

The Birr still weakened. Across four trading days last week, the average buying quote at commercial banks slipped to 129.94 to the dollar, and the average selling quote rose to 132.26. Most lenders respected the mandated two percent spread, but the central bank itself posted a tighter margin that widened from 0.13pc on April 14 to 0.25pc three days later, unveiling a cautious step toward depreciation.

Oromia International Bank (OIB) led the market. It lifted its buying rate to 132.39 and its selling rate to 135.04, well above the field and even some second-tier rivals. According to market watchers, the move is eyed to pull in remittances before the Easter holiday, when hard currency often flows home. Oromia Bank's aggressive position helped nudge overall prices higher and exposed a growing split between the established banks and a younger, hungrier cohort.

The third and fourth generation banks — Oromia, ZamZam, Amhara, Gadaa, Lion, Hijira, Tsedey and Goh Betoch — have not as much historical access to tradefinance dollars. They broke the 130 Br line that older banks once treated as taboo. Oromia Bank, after posting no public quote on April 14 (at least not on their websites and digital platforms), jumped straight to 132.39 on April 15 and held there. Amhara, Hijira, and Lion banks followed.

Observers say the crop of these generation banks is trying to capture holiday-driven diaspora inflows and make up for thin foreign currency pipelines.

The five largest private lenders — Awash, Dashen, Zemen, Abyssinia and Wegagen — took the opposite tack. Even after the Central Bank’s weighted average crossed 130 Br, they kept their buying prices below that level until April 16. Awash was stuck at 129.11 on April 14 and 15 and crept up to only 129.87 by April 17. Dashen and Zemen showed similar restraint. There appears to be a caution revealing informal guidance from regulators and a wish to shield corporate customers from sudden swings.

The state-controlled heavyweight keeps pulling in the other direction.

The Commercial Bank of Ethiopia (CBE), which handles most public sector and donor-funded inflows, has maintained its buying rate at 124.01 and its selling rate at 126.49 for several months. The spread met the rule, yet the quotes sat more than eight Birr below those of leading private banks, revealing the reality of a dual-track market: one price follows policy, while another follows demand.

Uniform spreads mask divergent realities. The two percent rule standardises margins, but nominal levels now vary by more than 10 Br among banks, a form of decentralised price discovery. With consumer prices high, external debt payments looming, and a wide current-account deficit, the Brewed Buck's slow decline is only part of the story. The bigger theme is a fracturing agreement over how to value the currency when fundamentals are weak.

The Central Bank’s own average ticked up from 129.91 on April 14 to 130.99 on April 17. Even so, the official price trails the street. Dealers put the parallel rate near 157, roughly 19pc higher than bank counters. Unless that gap narrows, more lenders are likely to copy the newcomers’ playbook, bidding up for every dollar and testing the edges of the managed float.

Officials strike an upbeat chord. They cite 5.2 billion dollars in export earnings and 3.6 billion dollars in remittances during the fiscal third quarter, and argue that, properly sterilised, such flows can ease the crunch. However, the refusal to publish reserve numbers feeds doubts. For now, their firepower amounts to gentle depreciation and periodic auctions.

The auction system has turned into a safety valve. Last week saw more demand than supply, like earlier rounds. It offered a snapshot of who expects what. Newer banks, hungry for currency, seem sure the Birr will weaken and want dollars in hand. Older banks, rich in trade clients, prefer to wait, balancing customer loyalty against regulatory risk. The result is a market pulled in two directions, with the Central Bank steering from the middle.

The stakes go beyond bank ledgers.

Ethiopia needs dollars for fuel, fertiliser, and spare parts, and faces hefty external debt bills. A weaker Birr makes imports dearer and feeds inflation, which is already sensitive. Yet, holding the line too hard chokes off trade finance and encourages hoarding. The National Bank’s balancing act grows harder by the week, and Easter cash only sharpens the tension. A strict guardrail on the current range would buy time, but might require more auctions. Doing nothing risks a slow leak that pleases no one.

In a holiday week filled with faith and inflows, the Brewed Buck is as much about tactics as fundamentals. Official words point to strength; bank behaviour pointed to strain. Between those signals sits a currency whose value is being set less by decree and more by the collective judgment of players big and small. Not all banks are created equal, and the market is beginning to show it. More battles for forex are surely ahead.

PUBLISHED ON Apr 19,2025 [ VOL 26 , NO 1303]

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