(Reuters) – Nigeria’s central bank moved to liberalize foreign exchange trading on Wednesday, capping a dramatic day that saw the official Naira rate devalued by more than a third.
In a statement issued after the end of the trading day in New York, the central bank said all FX trading would now take place at what is known as its Investors and Exporters (I&E) window and re-introduced the “willing buyer, willing seller” model.
The operational rate for all government-related FX transactions will be the weighted average of the preceding day’s executed trades, while order-based, two-way quotes cleared by a central counter-party will be re-introduced.
Nigeria’s dollar-denominated sovereign bonds extended the session’s sharp gains after the FX rules announcement, with an issuance maturing in 2033 up 2.4 cents to 78.625 cents, the highest in nearly five months.
“Devaluing and now unifying the currency are very positive and you have seen a positive reaction in bonds,” said Jeff Grills, head of emerging market debt at Aegon Asset Management, adding that the moves are “all generally positive for Nigerian assets.”
“Do we see increased pressure on the currency as a result? Maybe,” he said. “They will need to support the more challenged segment of the population now that they have removed the energy subsidies.”
(Reporting by Marc Jones, Elisha Bala-Gbogbo and Rodrigo Campos; editing by Jonathan Oatis and Grant McCool)
