Naira collapses further as CBN shortens FX settlement period

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By Odunewu Segun

Despite the Central Bank of Nigeria’s effort to inject liquidity into the official market to support the naira, the local currency has weakened further on both the official and black markets.

Only last week, the CBN pumped about $768 into the forex market and also promised to auction $100 million today, Monday, April 10 to be settled between one week and 30 days, as against sixty-day contracts it had written previously.

The naira fell to 328.50 per dollar on the official market on Monday with only $80,000 traded. The currency has slid past 400 naira on the black market.

The value of the naira has plummeted in the last few weeks due to a scarcity of dollars, although its value has fluctuated in the last few weeks due to the central bank’s interventions.

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The apex bank has sold more than $2 billion on the forward market since February. It auctioned $250 million in forward sales this week to boost liquidity and also intervened on the spot market.

Traders said the forward sales have improved liquidity but left the spot market inactive, leaving importers that want hard currency for immediate use reliant on the black market.

The CBN has been intervening on the official market this year to try to narrow the currency gap with the black market rate, which hit 520 to the dollar in February, prompting the bank to devalue the naira for consumers to 375.