The Central Bank of Nigeria (CBN) sold foreign exchange worth $50 million on the spot and forward markets in what the regulator called a test trade to determine the level of dollar demand on the currency market, traders told Reuters on Wednesday.
The apex bank has steadily reopened sales of the United States currency following a hiatus in supply induced by a coronavirus-induced lockdown to flatten the curve of the pandemic spread, which has hobbled its operations.
Demand for dollar has seen a dramatic rise, putting a strain on the naira. Importers with past due obligations have jostled for the greenback just as forex providers, like offshore investors, have departed.
On Monday, the CBN offered a 150-day forward on the dollar and equally sold foreign exchange on the spot market, according to traders quoting the regulator as saying that the accumulation of dollar demand was not substantial.
A spokesperson of the CBN confirmed Monday’s intervention on the spot market, also called the Investors and Exporters (I&E) forex window, noting that it had supported the local currency from a low of N480 on the black market.
Since February, international investors had sold off Nigerian assets as government-imposed lockdowns arrested economic activity and set an oil price slump in motion.
Pundits estimate there is an expansive demand of between $1.5 billion and $1.8 billion from investors seeking to exit Africa’s biggest economy, which approaches a recession in the third quarter.
The CBN has enjoined investors to remain calm in the past, assuring that fund could exit in an orderly manner. Trade volume on the spot market hit $38.46 on Wednesday.
On the parallel market Tuesday, the Naira strengthened by 10% to N435 against the dollar ahead of restart of dollar sales to retail operators. The hard currency was quoted at N380.50 on the official market.
The non-deliverable forwards market traded in London, which offers an idea of where the currency could trade, quoted the naira atN403 to the US dollar in three month’s time.
