TheCable

The Nigerian naira plunged to 280 against the dollar at the interbank market on Monday evening as the Central Bank of Nigeria (CBN) sold foreign exchange to 21 bidding banks to clear the forex backlog and solve liquidity problems.

The naira which opened on Monday at about 253 to the dollar at the interbank market, went up to 263, before settling at 260 as at 2pm.

Following CBN’s announcement to trade forex to banks and clear the foreign exchange backlog, which had existed for months, FMDQ extended the trading period from 2pm to 5:30pm to accommodate the marketing  reality.

“In order to engender market confidence, ensure credible price formation and sustain the integrity of the Nigerian Inter-bank FX market, the Central Bank of Nigeria (CBN) has resolved to clear all the backlog of FX demand in the country through spot and forward settlements,” CBN said in a statement on Monday.

The forex, which was sold at Special Secondary Market Intervention Sales (SMIS), saw banks receive a total of $532,867,169.11, ranging from 382 to 197 against the greenback.

Following the sales of forex by the CBN, the naira took a downward swing N283, its highest spot for the day, and closed the new regime’s first trading day at 281.85.

Analysts say the naira is gradually moving towards its real market value, but insist that traders are yet to fully participate, while those trading are doing the same with extreme caution.

According to FMDQ, the securities exchange company in charge of the fixed income securities and derivatives, the naira-settled OTC FX futures market will be kicked off by the CBN on June 27, 2016 with tenors between one month and two years, settling on bespoke maturity dates, providing liquidity in the product, and enabling corporate treasurers effectively and efficiently manage their FX risk.