Naira weakens to 355 against dollar

The naira extended its decline at the parallel market on Tuesday, as it traded at 355 to the United States dollar, down from 351 the previous day.

Similarly, the local currency closed at 282.50 to the dollar at the new interbank market, slightly weaker than the 282 it ended on Monday.

The Central Bank of Nigeria had last week floated the naira and adopted a single structure through the interbank/autonomous window for the nation’s foreign exchange market.

The CBN has been selling dollars on the interbank market since it ended its 16 month-old currency peg last week, and it on Tuesday asked currency traders for bid-offer quotes at around 11:18am, according to Reuters.

The apex bank sold an undisclosed amount of hard currency on the interbank market on Tuesday to ease dollar shortages and provide importers the dollars to pay for the products they bring into the country, traders were quoted to have said.

A total of $51m traded on the interbank market just before the market closed, which traders attributed to the central bank’s intervention.

The old currency peg had set a rate of N197 to the dollar, which over-valued the naira and led to a shortage of dollars that choked off growth in the economy. The shortage was exacerbated by plunging prices for oil, Nigeria’s biggest export and its main source of hard currency.

The CBN abandoned the peg to allow the currency to trade freely on the interbank market, but lack of liquidity has curbed activity, traders say, leaving the central bank as the main supplier of hard currency.

Removing the peg has narrowed the gap between naira rates available on the official and black markets.

The bank on Monday introduced an over-the-counter futures market for the currency to help manage dollar demand, quoting the naira firmer at 279 to the dollar in a month’s time and at 210 by April next year.

In the non-deliverable forwards market, the naira rose against the dollar on Tuesday, with the one-month contract quoting the currency as firm as 283, after hitting 296 a week ago.