LAGOS, June 24 (Reuters) – Nigeria’s naira held steady at the close of trading on Friday as the central bank intervened for a fifth straight day with dollar sales to ease liquidity after it floated the currency earlier this week, traders said.
The naira ended at 281 to the dollar, its same level as previous day, after the central bank’s intervention.
A total of $58 million volumes exchanged hands just before market close which traders attributed to central bank’s intervention. The interbank market opened at 0800 GMT with no activity for more than three hours.
Nigeria ditched the peg on the naira to allow the currency to trade freely on the interbank market but traders say dollar liquidity is tight, leaving the central bank as the main supplier of hard currency.
“There’s still a lot of demand with no liquidity,” one trader said, adding that it was not clear for how long the bank would continue to sell dollars on the interbank market.
The central bank has been selling dollars to boost liquidity and trading on the interbank market after it abandoned a 16-month old exchange rate peg to ease currency restrictions which led to the naira plunging 30 percent on Monday.
Deputy governor Sarah Alade told Reuters that the bank expected Britain’s vote to exit the European Union to be good for its forex policy as interest rates are likely to stay low in the U.S., channeling foreign investors to Nigeria.
“We only need to take advantage of this opportunity to grow the economy,” she said.
Britain voted to exit the European Union, spreading jitters across emerging markets including Nigeria.
Quitting the EU could cost Britain access to the EU’s trade barrier-free single market and means it must seek new trade accords with countries around the world.
Nigeria’s central bank sold an undisclosed amount on Friday. It auctioned a total of $4 billion on Monday, in both spot and forward trades, to clear a backlog of dollar demand.
The move has narrowed the gulf between the naira rates available on the official and black markets, though unofficial market was trading at 19 percent lower than the interbank market at 345 on Thursday. (Reporting by Chijioke Ohuocha and Oludare Mayowa; Editing by James Macharia)
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