CBN Settles $180m Futures Contract

The Central Bank of Nigeria (CBN) wednesday settled OTC FX futures contracts on the interbank market to the tune of $180 million.

The FMDQ OTC Securities Exchange said the transaction settlement followed the maturity of the “third OTC Futures Contract Notional $180 million of naira/$ of September 28, 2016, settled today on the FMDQ OTC Securities Exchange”.

This is just as the naira continued its precipitous decline on the parallel foreign exchange market, falling to a historic low of N460 to the dollar, lower than the N452 to the dollar on the day before.

However, the spot rate of the naira on the interbank FX market closed at N312.99 to the dollar, marginally lower than the N312 to the dollar from the previous day.

Commenting on the sharp depreciation of the naira on the parallel market, the Managing Director/Chief Executive Officer, Cowry Asset Management Limited, Mr. Johnson Chukwu, attributed it to the drop in the country’s external reserves. Nigeria’s external reserves stood at $24.615 billion as of Tuesday.

“The amount of the central bank’s intervention on the interbank has dropped drastically because the reserves have also dropped drastically. So the demand that cannot be met on the interbank market is now being redirected to the parallel market and therefore heating up the market.

“The gap between supply and demand has widened significantly and the central bank having seen that the reserves are at their current level, it is no longer in a position to intervene aggressively in the interbank market,” Chukwu explained.

A few days ago, currency analysts had blamed the performance of the naira on the parallel market on the activities of currency speculators.

The President, Association of Bureau De Change Operators of Nigeria (ABCON), Mr. Aminu Gwadabe, said that the rate of the naira on the parallel market was not a true reflection of the value of the currency. He also attributed the development to the activities of speculators.

According to him, the situation in the parallel market was being driven by speculators taking advantage of the poor implementation of the CBN’s policy requiring banks to sell dollars to bureau de change operators.