UPDATE 1-Nigeria's five-year naira futures slide past 550 after cenbank weakens contract -traders

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By Chijioke Ohuocha
ABUJA, May 7 (Reuters) - Nigeria's five-year naira futures
slid past 550 to the dollar on Thursday after the central bank
weakened the naira on the derivatives market, signaling more
pain to come for the currency, traders said.
The bank softened the currency on average by 73 naira across
tenors, traders said, with the one-year maturity revised by 27
naira. The 5-year naira futures, introduced in February,
weakened to 569 per dollar, traders said, from 413 naira in the
previous session.
The naira has been hitting new lows on the black and
over-the-counter spot markets since March after the central bank
adjusted its official rate, implying a 15% devaluation. An oil
price crash last month, triggered by a coronavirus pandemic,
also worsened dollar shortages.
Dollar demand has been swelling and piling up pressure on
the naira. Importers with past due obligations have been
scrambling for hard currency while providers of foreign exchange
such as offshore investors have exited.
The market differential between one-year naira futures and
forwards narrowed to 104 naira on Thursday from 130 naira in
March, showing that the bank is keen to close the currency gap
after an oil price plunge put the naira under pressure.
The non-deliverable forwards (NDF) market traded in London,
which gives an indication of where the currency could trade in a
year's time, quoted the naira at 525 to the U.S. dollar.
The central bank devalued the official currency rate two
months ago in a move to converge a multiple exchange rates
regime which it has used to manage pressure on the naira.
But dollar shortages has caused the gap between the black
market and official market to widen especially after the bank
suspended dollar sales in the wake of a coronavirus lockdown.
The bank has resumed dollar sales to local clients this
week, selling around $100 million per week but is yet to sell to
offshore investors, traders say, estimating backlog demand at
around $1.5 billion to $1.8 billion.