Nigeria forwards surge as stocks rise on expected Naira adjustment

Naira forward rates soared to a record and U.S.-traded Nigerian stocks gained as traders increased bets that the central bank will abandon its currency peg after saying it will allow more flexibility in the foreign-exchange market.

Rates on three-month naira-dollar forward contracts climbed 16 percent to 288 per dollar on Wednesday, suggesting traders predict a 44 percent devaluation of the currency. The Global MSCI Nigeria Exchange-Traded fund gained 1.5 percent in U.S. trading on Tuesday.

The Central Bank of Nigeria signaled on Tuesday it would allow the naira to weaken, abandoning a currency peg that has starved Africa’s biggest economy of dollars and slowed foreign investment to a trickle. Governor Godwin Emefiele said details of the new framework were still being worked out and would be released “in coming days.”

The bank has pegged the local unit at 197-199 per dollar since March 2015, deepening an economic slump caused by the plunge in oil prices.