By Peter Egwuatu
THE Central Bank of Nigeria, CBN, will begin foreign currency futures trading soon with auctions to be conducted as much as three months forward.
The CBN disclosed this, Tuesday in a statement posted on its website, stressing that under the guidelines, it will conduct the auctions twice a week with three tenors of one, two and three months.
According to the statement, the minimum allowable bid by an authorised dealer for each tenor will be $500,000.
“With a deep forward market, it is believed that the demand for foreign exchange will smoothen out and accelerated demand in reaction to anticipatory depreciation in naira will reduce,” CBN said
According to Bloomberg report, the foreign exchange reserves of Nigeria, sub-Saharan Africa’s second biggest economy, declined by about $10 billion in the year through November 29, 2010 to $33.1 billion as the Central Bank used the funds to defend the naira. The Central Bank was unable to meet lenders’ demand for foreign currency at all 11 foreign exchange auctions held since December 1, 2010, according to data from the bank.
At the latest auction held yesterday, the Central Bank sold $250 million of foreign currency, less than the $256.7 million lenders requested. The marginal rate, which is also used as the prevailing exchange rate, was N150.35 compared with N150.31 at the previous auction held on January 26.