Naira falls as CBN directs banks to submit bids

Naira yesterday fell against the dollar at the autonomous market by N3 or 0.87 percent, as the Central Bank of Nigeria (CBN) directed banks to submit bids for FX at N197/$.

It closed at N348 against dollar compared with N345/$ the previous day. At the parallel market, it weakened by N1 or 0.29 percent to close at N351/$ yesterday from N350/$ the previous day.

On Tuesday, the central bank said it would adopt a flexible exchange rate policy, a shift from a peg for the naira seen as overvalued, which had hampered investment. It will give guidance on the policy within days, creating uncertainty, traders told Reuters.

The bank has said it will introduce a flexible interbank market from a de facto peg of around N197 and retain a window for funding critical transactions, creating a dual exchange rate.

Traders said it was not clear whether the bank would settle Thursday’s bid at N197, adding that quantity of dollars sold has been declining. The central bank sold around $110 million last week, down from around $150 million previously, traders say.

The bank did not say how much it would sell on Thursday.

The naira is trading around the pegged rate on the official interbank market on Thursday at 197.50 to the dollar but is quoted at 350 on the black market.

One-month non-deliverable forwards (NDFs) showed the naira trading at N266/$, after hitting N276/$ on Wednesday.