CBN’s $697m set­tle­ment eases in­ter­bank FX mar­ket

Daily Trust - - BUSINESS - From Sun­day Michael Ogwu, La­gos

The per­for­mance of the naira ap­pre­ci­ated at the in­ter­bank Forex mar­ket fol­low­ing the set­tle­ment of the one-month for­ward con­tracts of $697 mil­lion by the Cen­tral Bank of Nige­ria (CBN).

A se­ri­ous cash crunch had forced the overnight lend­ing rate to jump al­most 40 per cent from 18 per cent the pre­vi­ous week which forced the naira to N330/$ as at Thurs­day. The pres­sure also saw the naira de­pre­ci­ate to N378 to a dol­lar on the par­al­lel mar­ket.

How­ever, the naira gained N2.45 to close at N307.43 on to a dol­lar on Fri­day up from the N310.43 to a dol­lar it closed the pre­vi­ous day.

Bank cus­tomers who bought the for­ward con­tracts made a gain of about N27 to the dol­lar, as a result of the pre­vail­ing ex­change rate of N282/$ when the bids were made a month ago.

It could be re­called that un­der the new float­ing rules, a prospec­tive buyer can use the for­ward mar­ket for hedg­ing against price move­ments. It al­lows the buyer and the seller to buy or sell an as­set at a spec­i­fied price on a fu­ture date.

On the first day of trad­ing un­der the re­vised rules for the in­ter­bank mar­ket on June 20, the CBN had in­ter­vened through the Spe­cial Sec­ondary Mar­ket In­ter­ven­tion Sales (SMIS) to clear the back­log of $4.02 bil­lion pent-up de­mand for FX.

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