In Fragmented March, Brewed Buck Slips as Banks Break Ranks

Oct 18 , 2025.

The Birr’s (Brewed Buck) seemingly orderly 1.1pc depreciation last week belied a more fractured reality. While the Central Bank’s policy glide path continues to maintain the illusion of stability, beneath the surface, the forex market is fragmenting. The once-coordinated top five private banks — Awash, Abyssinia, Dashen, Wegagen, and Zemen — have splintered in their responses to tightening liquidity and intensifying competition for hard currency.

Oromia Bank, a mid-tier player in the industry, reemerged as a frontrunner, quoting 148.60 Br to the dollar, outbidding players like Amhara Bank and the Bank of Abyssinia. ZamZam Bank’s static quote of 142.65 Br widened the market’s spread to 5.95 Br, the largest divergence since early September, pointing to diverging liquidity strategies and risk appetites among banks.

Across all banks, the average buying rate climbed to 145.9 Br and the selling average to 148.8 Br, up from 144.3 Br and 147.2 Br a week earlier.

The Central Bank kept its own spread unchanged at one percent, buying at 146.26 Br and selling at 147.72 Br, while private banks observed the customary two percent corridor. Beneath that veneer, three clusters emerged.

A high-rate group (Amhara, Abay, Abyssinia, Lion, Gadaa and Wegagen banks) paid between 147.6 Br and 147.9 Br to buy and 150.5 Br to 150.8 Br to sell, chasing remittances and travellers' cash. Mid-tier group (Awash, Bunna, Cooperative, Dashen, Enat and Goh) sat in the 144.5-to-146.5 range. A low-rate camp (CBE, Goh-Betoch, Nib, Sidama and Siinqee) posted from 141 Br to 144.5 Br. CBE, the state-owned giant, remained the most conservative, hewing close to the Central Bank's guidance while others edged higher.

Some banks moved sharply. Abyssinia Bank’s buying quote leapt from 144.20 Br to 147.90 Br, a 2.6pc gain. Zemen climbed to 145.57 Br from 144.01 Br, up 1.1pc. Berhan advanced 1.8pc to 145.41 Br. By contrast, CBE rose only 1.2pc, and ZamZam did not shift for six straight days.

The interbank spread, the gap between the highest and lowest buying quotes, expanded from 8.23 Br on October 13 to 8.40 Br by week’s end. Yet, daily swings still stayed within half a Birr, evidence of the Central Bank’s smoothing hand and its restraint.

A louder signal came from a foreign-exchange auction last week. The Central Bank offered 150 million dollars, drew bids from 31 banks and pushed the weighted average to a record 148.10 Br, eclipsing its own posted rate for the first time in three weeks. According to market watchers, the timing cooled a parallel market rumoured near 180 Br and let commercial banks bid without breaching the official corridor.

CBE responded by lifting its buying quote to 144.44 Br, 4.34 Br higher than the prior week, and dangling a 10-Birr “top-up bonus” for a dollar. The gesture grabbed liquidity and reminded rivals that the state lender can reclaim dollars whenever it wishes.

The 1.1pc slide may fit the Central Bank’s glide path, about 4.5pc annualised. Officials want the gap with street rates narrowed before talks with the International Monetary Fund resume; exchange-rate unification remains high on the agenda for the next program. A controlled drift now eases a bigger move later. Market watchers expect buying quotes to breach 150 Br by early November and selling to test 153 Br if supply stays tight.

For now, the Central Bank's mix of narrow spreads and auction attempts to keep order. No speculative break has opened beyond the corridor, yet seams are visible. A wide gap between Oromia Bank’s 148.60 and ZamZam Bank’s 142.65, 5.95 Birr by the close, demonstrated a market feeling its way through scarcity and pricing risk amid tentative liberalisation. Wegagen provides a telling case. A bellwether for wholesale trade, it raised its buying quote from 143.50 Br to 147.60 Br, up 2.8pc, while keeping the two percent spread.

Until the auction last week, the Central Bank had held the highest publicly posted cash rate for three weeks, unusual for a regulator that usually lets the market lead. By stepping back, it showed confidence that competition could lift rates without fresh directives. Daily moves confirmed the managed nature of the market. For many banks, fluctuations stayed within 0.50 Br, and spreads rarely widened beyond the two percent rule. Banks police themselves, knowing big jumps draw immediate attention.

Still, creeping divergence mattered. A spread under three Birr in late August has now burst past five Birr; the psychological barrier of 150 Br is soon to be crossed, and pressures could build faster. The next auction will be the compass. If dollar supply stays tight, traders expect another lift in the weighted average and a green light for higher street quotes.

For the moment, the Birr’s path appears set with a steady and policy-managed weakening, outwardly calm yet driven by deeper currents of liquidity and competition. Last week’s break in alignment shows how quickly conformity can fray when dollars grow scarce. Whether fragmentation widens will depend on how well the Central Bank balances guidance and supply. The coming weeks will reveal whether the careful float can stay orderly once the 150 Br line is crossed.

PUBLISHED ON Oct 18,2025 [ VOL 26 , NO 1329]