Nigeria’s FX traders lower speculation on naira devaluation …

LAGOS, Nigeria, Capital Markets in Africa — FX traders lower their speculations against the naira, as the Central Bank of Nigeria ignore investors/analysts devaluation calls at the Tuesday’s press brief.

At the press brief, the central bank governor Emefiele provided no suggestions that the central bank is ready to devalue the naira and ease the import controls which enable the interbank exchange rate to be fixed between 197-199 naira per dollar since March 2015. Even though the black-market rate has plunged as foreign currency has become scarce, hitting a record low of 306 per dollar before the governor press release  on Tuesday.

Three-month Non-Deliverable Forward (NDF*) contracts gained 8.02 percent to 229.5 per dollar on Tuesday. The implied depreciation relative to CBN’s official upper bound of 199 naira declined to 15 percent to 25 percent  prior the central bank’s rate announcement. Likewise, the 12-month NDF contracts soared by 3.14 percent to end at 278 naira per US dollar relative to previous trading session. That implies that traders now expect a depreciation of about 39 percent in that period, after predicting a weakening of 44 percent before Tuesday’s announcement.

*NDF are a type of cash settled financial derivative. In the foreign exchange market, traders and investors will enter into an outright forward or futures contract where counterparties agree to settle based upon the difference between a strike price and the prevailing spot rate for a specified notional amount on a defined fixing date in the future.