Birr's Gentle Drift Shows Banks Divergent Forex Strategies, Market Strain

May 11 , 2025.

In a week defined by whispers rather than shouts, the foreign exchange market revealed a telling duality of centralised moderation by the National Bank of Ethiopia (NBE) and nimble, bank-level manoeuvring in the retail cash market. Cash-rate data from 29 commercial banks charted a portrait of near-static policy anchors alongside pockets of aggressive play for scarce dollars.

Commercial Bank of Ethiopia (CBE) was at the epicentre. The state-owned behemoth was setting what has become, paradoxically, the lowest benchmark in town. CBE posted the lowest rates, buying greenbacks at 124.01 Br and selling at 126.49, about seven Birr below the Central Bank’s weighted average of 132.84 Br on May 10. To keep sellers interested, the CBE added a 10-Br “bonus,” down from 12 Br a few weeks earlier.

The sweetener signals CBE’s status as a policy tool first and a profit engine second.

Oromia Bank played the opposite hand. On May 10, it offered 134.34 Br for a dollar, the highest in town and a full 10 Br more than CBE’s base. Its forex managers may consider that capturing retail inflows can ease interbank pressures in tight times.

Most private banks chose gentler moves. However, Cooperative Bank of Oromia (Coop Bank) swung the widest, lifting its buy quote from 129.06 Br on May 5 to 130.91 five days later; its standard deviation exceeded 0.75 Br, the highest in the pack. Wegagen and Sidama banks nudged rates upward, though neither matched Coop’s mid-week shifts. Siinqee and Zemen banks stood pat, shadowing CBE’s conservative posturing, but, in the case of the first, without the bonus, an approach that may show thin dollar reserves.

Behind the retail dance was the Central Bank’s auction engine. On May 6, it put 60 million dollars on the block, drawing bids from 16 commercial banks at a weighted average of 132.96 Br.

Regulation remained active in the background. The NBE trimmed its spread to 0.16pc on May 6 after opening the week at 0.25pc, widened it to 0.53pc on May 8, then narrowed to 0.10pc for the final two sessions. Market observers say that by oscillating spreads, the Central Bank could be signalling control at the wholesale level while letting the retail market absorb pressure. Too sharp a move could risk panic; too mild invites speculative runs.

However, the challenge for several banks remains that supply, not sticker price, is the fundamental constraint.

The market’s three tiers — the ultra-conservative, the measured adjusters, and the premium acquirers — appear set to persist. CBE, Sinquee and Zemen banks may continue casting low-price anchors; Coop Bank, Sidama and Wegagen could adjust tactically; Oromia and Lion banks may chase volumes with high bids. Unless an exogenous catalyst jolts confidence — be it a fresh dollar inflow or a policy shift — the Brewed Buck's descent may remain a soft whisper rather than an open admission of weakness.

PUBLISHED ON May 11,2025 [ VOL 26 , NO 1306]