Naira extends gains, sells for 281/dollar


The naira traded at 281.67 to the United States dollar on Thursday at the new interbank foreign exchange market, compared to 282.80 the previous day.
The Central Bank of Nigeria sold dollars on the interbank market for the fourth day to ease dollar shortages after it floated the currency, Reuters quoted traders to have said.
The naira was said to have traded at 283 to the dollar at 12:49pm on Thursday, on volumes of $76.8m, which traders attributed to the CBN intervention.
The interbank market opened at 8am with no activity for more than three hours.
The central bank had on Monday abandoned a peg of 197 to 199 on the naira to allow the currency to trade freely on the interbank market, but traders said dollar liquidity was tight, leaving the central bank as the main supplier of hard currency.
The currency could stabilise next week on increased dollar liquidity from month-end greenback sales by oil companies, according to Citibank.
The naira firmed at the parallel market to 335 to the dollar against 370 a dollar last week.
“As we approach month-end, we expect the multinational oil companies to begin their month-end dollar sales to generate some naira. This should provide supply of dollars to the market in the coming days,” local unit of Citibank said in a note.
The CBN has intervened in the market by selling foreign exchange since it ended the currency’s 16-month fix of 197-199 per dollar on Monday. It sold $4bn in the spot and forwards markets that day to clear a backlog of demand for hard currency, and followed that with about $100m of sales on the spot market on Tuesday.
Fitch Ratings had said the shift to a more flexible foreign-exchange regime could aid the sovereign’s adjustment to lower oil prices and support growth, although implementation may present challenges.
It said the establishment of the new framework’s credibility would be key to its effectiveness in attracting portfolio flows and Foreign Direct Investments to make up for Nigeria’s lower oil export receipts.
The CBN had last week issued revised guidelines for a single, market-driven inter-bank foreign exchange market, open to authorised dealers and other entities.
According to Fitch, the central bank’s previous policy of restricting access to the official forex market and supporting the naira, rather than risk the inflationary impact of devaluation, has been negative for the nation’s sovereign credit profile.

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