Nigeria’s naira weakened against the dollar for a second day on Tuesday after the central bank removed its currency peg in an effort to alleviate chronic foreign currency shortages choking growth.

The naira traded 1.1 percent weaker at 285 to the dollar at 1,000 GMT, with $9 million traded. It had slumped 30 percent on Monday.

The central bank caved into pressure to effectively devalue the naira in the wake of falling prices for oil, the country’s main export, announcing last week that it would abandon its 16-month-old peg at 197 to the dollar.

On Monday, the central bank sold $3.5 billion on the forward market after it auctioned $532 million and intervened on the interbank market to clear backlog of hard currency orders worth around $4 billion.

“We know it’s not every demand that has been settled. Trading will depend on what happens after what central bank did,” one trader said. The central bank had yet to provide details of the forward deals including the settlement date, the trader added.

The bank sold $697 million in one-month forward, $1.22 billion in two-month contract and $1.57 billion due in three months, in order to clear a backlog of $4.02 billion of demand, market operator FMDQ Securities Exchange said.

In May, Nigeria lifted prices of petrol by 67 percent to 145 naira ($0.73) a litre to eliminate a costly subsidy scheme and ease severe fuel shortages. The government then used an exchange rate of 285 naira to the dollar to calculate petrol imports, which economists believed triggered the currency reform.

In non-deliverable forward markets, the one-year naira-dollar forward were quoted at 349. The nine-month contract fell as low as 337 per dollar while the six-month contract traded at 327.

Other major oil producers, including Russia, Kazakhstan and Angola, allowed their currencies to fall much earlier after crude prices collapsed. (tv360Nigeria.com)

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