CBN’s $697m settlement eases interbank FX market
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.