The Nigerian Naira gained against the US dollar in the new interbank market on Wednesday after the Central Bank of Nigeria sold dollar to stabilize the market.
The Naira closed at N282.80 a dollar from 284.5 recorded on Tuesday.
Since the apex bank abandoned its 16-month fix rate on Monday, the central bank has sold about $4.1bn in both spot and forward markets to clear the backlog of demand for forex and modulate prices.
“The market expects the central bank to continue to intervene on a daily basis for now as it is easily the only source of dollar supplies,” said Mr. Sewa Wusu, the Head of Research at SCM Capital Limited.
“Foreign direct investment and portfolio flows are yet to start flowing in as investors wait on the sidelines to watch for liquidity, price discovery and stability,” he added.
Forward contracts dropped as traders reduced their bets against the Naira, although some still see it falling about 6.5 percent by September, it is yet uncertain if they are willing to take the risk with the current improvement.
The Naira three month non-deliverable forward contracts dropped 4.7 percent to 302.25 per dollar, the most on a closing basis since May 17. While, yearly contracts declined 3.7 percent to 340 per dollar.
“The monetary authority will be a regular participant in the interbank market, at least in the short term, to ensure that sufficient liquidity is available to facilitate two-way trade,” analysts at Johannesburg-based Rand Merchant Bank, including Celeste Fauconnier and Nema Ramkhelawan-Bhana, said in a note to clients.