The naira yesterday gained slightly against the US dollar after currency dealers introduced a peg on resale spread (the gap between the buying/selling rate) of FX at N0.50k in the interbank market.
The move was as a result of naira free fall on Friday, to a record low of N292.25 against the dollar, traders said.
Speaking with BusinessDay on phone, Wale Abe, executive secretary, Financial Markets Dealers Association (FMDA), said the introduction of a peg on the resale premium was to check and curtail volatility in the FX market to a reasonable margin.
However, the local currency yesterday appreciated slightly in value against the dollar by N0.10k to close at N292.15k/$, which was 0.03 percent compared with N292.25k/$ on Friday last week, data from FMDQ revealed.
At the autonomous and parallel markets, the naira closed stable at N360/$ and N365/$, respectively. The first trade of $780,000 occurred yesterday at N292.40/$ at 1116 GMT, more than three hours after the market opened, a trader said, adding that activity was slow pending intervention by the central bank.
Reuters quoted a trader as saying a dealer can buy at any rate but resale spread should not be more than N0.50, as directed by FMDA.
With primary dealers required to resell 70 percent of any dollar bought from the central bank on the day of purchase, low turnover on the interbank currency market has the effect of driving down the value of the naira.
The central bank said last month during the unveiling of the FX policy reforms that the naira would trade with no pre-determined spreads.
It ditched its 16-month old peg on the naira in June to allow the currency to trade freely on the interbank market but thin liquidity has hampered activity, traders say, leaving the central bank as the main supplier of hard currency.
Other past suppliers of dollars, including oil firms, are now selling part of their hard currency directly to petrol importers under an arrangement with the government, traders say.
Some $697 million the central bank sold in one-month forward contracts fall due later this month, traders said, with contracts for July delivery quoting the naira at 279.
On non-deliverable forward markets, the one-month naira-dollar forward was quoted at N314. The one-year contract fell as low as N351 per dollar.
