Naira firmed to N281.72 on Wednesday on its third day as a floating currency after the Central Bank of Nigeria, CBN, ditched a 16-month old peg on the exchange rate.
The naira opened at N282 to the greenback, after closing weaker at N284 the previous day, traders said. The currency slumped 30 per cent at its float on Monday.
Indicative rates on Wednesday showed banks were quoting to buy the dollar between N281 to N295.
In the non-deliverable forwards market, the naira rose against the dollar on Wednesday, with the one-month contract quoting the currency as firm as N288, after hitting N317 on Monday.
The CBN’s move to float the currency has narrowed the gulf between the naira rates available on the official and black markets, though unofficial traders were still offering it at N340 to the dollar on Wednesday.
The CBN caved in to months of pressure to effectively devalue the naira in response to falling prices for oil, the country’s main export.
Other major oil producers, including Russia, Kazakhstan and Angola, had allowed their currencies to fall much sooner after crude prices collapsed.
The move has narrowed the gulf between the rates available on the official and black markets – though unofficial traders were still offering the currency at N345 to the dollar on Tuesday.
On Monday, the CBN sold $3.5 billion on the forward market after it auctioned $532 million and intervened on the interbank market to clear backlog of hard currency orders worth around $4 billion.
“We know it’s not every demand that has been settled. Trading will depend on what happens after what central bank did,” one trader said.
The CBN had yet to provide details of the forward deals including the settlement date, the trader added.
Traders said the central bank did not inform the market whether it was settling demand with spot or forward trades, creating uncertainty especially for hard currency users who require the dollar immediately.
The bank sold $697 million in one-month forward, $1.22 billion in two-month contract and $1.57 billion due in three months, in order to clear a backlog of $4.02 billion of demand, market operator FMDQ Securities Exchange said.