Naira traded at 282 to the dollar after the Central Bank of Nigeria’s, CBN, intervention, indicating slight weakness when compared to Friday’s close of 281. The CBN asked for bid-offer quotes from currency traders on Monday as it sold dollars on the interbank market to boost liquidity.
After abandoning the naira’s 16-month old exchange rate peg a week ago, the apex bank sold dollars at an auction to clear a backlog of demand and keep markets active.
It sold an undisclosed amount of dollars on Monday. However, the interbank market traded a total volume of $32 million just before the market closed which traders attributed to CBN’s intervention.
The interbank market opened at 0800 GMT with no activity for more than three hours.
“Liquidity is still relatively thin,” one trader said, adding that clients were waiting to see where the naira settles eventually before they start to participate in the market.
The federal government ditched the peg on the naira to allow the currency to trade freely on the interbank market but thin liquidity has hampered activity, traders say, leaving the CBN as the main supplier of hard currency.
Currency traders on Monday said they had tightened the differential between bids and offers to 0.5 naira from one naira set when the currency was floated last week, to try to boost trading and attract liquidity.
Prior to old exchange rate peg, the currency market traded on 0.5 naira spreads, they said.
Nigeria’s interbank market has traded for six days after the CBN’s forex reforms.
Traders are expecting substantial currency flows from oil companies and exporters to start to trickle in from this week.
Source:: Nigerian Pilot