The Central Bank of Nigeria
(CBN) will today fund the one-month forward contracts of $697 million on the
interbank FX market, effectively improving dollar liquidity in the market, as
the accounts of customers that hedged against the dollar through their banks
last month will get their accounts credited, ThisDay has reported.
Sources in the CBN confirmed
that there would be improved availability of dollars today, thus easing
pressure on the naira which fell to its lowest level yesterday since the
guidelines were revised last month for trading on the interbank FX market. The
naira closed at N310.43 to a dollar yesterday, compared to N294.24 to a dollar
from the day before.
Financial market dealers
attributed the development to scarcity of FX since the CBN decided to stop its
intervention and all the currency to be truly market-determined.
But on the parallel market,
the naira did not budge, as it remained unchanged at N375 to a dollar
yesterday.
Bank customers who bought
the forward contracts will be expected to make a gain of more than N20 to the
dollar, given that at the time the bids for the forwards were made a month ago,
the naira exchanged for about 282 to the dollar.
On the first day of trading
under the revised rules for the interbank market on June 20, the CBN had intervened
in the market through the Special Secondary Market Intervention Sales (SMIS) to
clear the backlog of $4.02 billion pent-up demand for FX.
According to the CBN, it
sold $532 million on the spot market and $3.487 billion in the forwards market.
A breakdown of the $3.487
billion forward sales by the central bank showed that $697 million was for one
month (1M), $1.22 billion for two months (2M) and $1.57 billion for three
months (3M).
A forward contract is a
customised contract between two parties to buy or sell an asset at a specified
price on a future date. A forward contract can be used for hedging or
speculation, although its non-standardised nature makes it particularly apt for
hedging against price movements
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