Naira extends losses on day 2 of flexible exchange

The Naira extended its losses against the dollar in thin trade on Tuesday, a day after the Central Bank of Nigeria (CBN) removed its currency peg in an effort to alleviate chronic foreign currency shortages.

Fifteen trades worth a total of $50 million had been made, most recently at N284 to the dollar - just weaker than where it ended up on Monday after a 30 per cent slump.

Traders said they were holding off, waiting for either fresh central bank intervention or dollar sales from oil companies.

"We are waiting for liquidity to come in through whatever means so that trading can continue," one trader said.

 

The central bank caved in to months of pressure to effectively devalue the Naira in response to falling prices for oil, the country's main export, announcing last week that it would abandon its 16-month-old peg at 197 to the dollar.

 

Other major oil producers, including Russia, Kazakhstan and Angola, had allowed their currencies to fall much sooner after crude prices collapsed.

 

The CBN move has narrowed the gulf between the rates available on the official and black markets, though unofficial traders were still offering the currency at 345 to the dollar on Tuesday.

 

However on Monday, the central bank sold $3.5 billion on the forward market after it auctioned $532 million and intervened on the interbank market to clear backlog of hard currency orders worth around $4 billion.

 

"We know it's not every demand that has been settled. Trading will depend on what happens after what central bank did," one trader said. The central bank had yet to provide details of the forward deals including the settlement date, the trader added.

 

Traders said the central bank did not inform the market whether it was settling demand with spot or forward trades, creating uncertainty especially for hard currency users who require the dollar immediately.

 

The bank sold $697 million in one-month forward, $1.22 billion in two-month contract and $1.57 billion due in three months, in order to clear a backlog of $4.02 billion of demand, market operator FMDQ Securities Exchange said.