Forex Scarcity: CBN sells dollar to support Naira

Interbank rate

The Central Bank of Nigeria sold around $1.5 million at the interbank forex market on Tuesday to support the local currency and ensure the closing rate stabilises, traders said.

The naira closed at 305.50 to the dollar on the interbank market, same level it has traded since last week, having touched 325.50 a dollar intraday, but gained after the central bank’s intervention.

Traders said the naira had consistently closed around 305.5 to the dollar since Aug. 22, an indication that the central bank is concerned about a particular price range for the local currency.

“Actually, we don’t expect the central bank to continue to keep the rate at this level considering what the demand is … but it seems they (central bank) are concerned about a particular closing rate,” one senior currency dealer said.

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On Monday, the currency market registered $327 million worth of trades, about six times more than its usual volume. That included a single $270 million transaction at 345 naira per dollar, by foreign investors buying local currency bonds.

Average trading is around $50 million a day on normal days. It might reach $100 million on days the central bank intervenes in the currency market.

Traders said dollar shortage remains a major concern in the market even with the daily intervention by the central bank and a pocket of flows from offshore investors.

The naira traded at a fresh record low of 418 to the dollar on the black market, against 414 a dollar on Monday.

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