The naira was stable against the U.S. dollar at the inter-bank market on Tuesday after the Central Bank of Nigeria lowered its target trading band for the currency and kept benchmark interest rates on hold. The apex bank moved the band 3 per cent band on the naira to trade in to N150-N160 to the U.S. dollar, compared with N145-N155 previously, due to prolonged naira weakness and high dollar demand.
The unit steadied at N158.99 to the dollar, the same level it was at before the central bank’s announcement on Monday, after opening lower at N159.50.
“There was an initial pressure on the naira, which has moderated.” one currency dealer said, adding that the market had already priced in the move, after the bank earlier on Monday auctioned $250 million at 155.21 naira to the greenback. Financial markets had closed before Monday’s announcement. By moving the band on which the naira trades at its auctions to N150-N160 naira to the U.S. dollar, the central bank wants to converge the official forex rates with the inter-bank and narrow arbitrage opportunities.
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