CBN Finally Frees the Naira, Funds Forward Contracts – Thisday


By Obinna Chima

Following the pressure mounted by the financial markets and analysts on the Central Bank of Nigeria (CBN) to allow the naira to be truly market determined so as to attract offshore investors who have continued to remain on the sidelines, the CBN has finally freed the nation’s currency so that its rate on the Nigeria Interbank Foreign Exchange (NIFEX) will be determined by the interplay of demand and supply.

The central bank will equally fund the one-month forward contracts of $697 million this week, meaning that authorised dealers that bid on behalf of their customers for the contracts last month would be making a kill of almost N10 to the dollar, given that the naira fell to N292.25 on the interbank market last Friday.

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

According to the CBN, it sold $532 million on the spot market and $3.487 billion in the forwards market.