Nigeria's naira fell to an all-time low on Thursday, crossing 300 to the dollar for the first time after the central bank last month lifted its peg on the currency to allow it to trade freely on the interbank market.
The naira fell 5.4 percent against the greenback to 309 at 1224 GMT on dollar supply shortages. It later recovered to close at 292.40 on thin trades. The interbank market traded a total of $7.27 million.
Traders were expecting the central bank to intervene to ease dollar shortages, which did not materialise. The bank has not intervened for most of this week, they said. Instead it was mopping up naira liquidity to support the currency.
"Now that the market has adjusted upwards it seems people are comfortable and that's why we are seeing some trades," one trader said.
Banks had been quoting the dollar at 281 to 285 naira after the central bank lifted its 16-month old peg of 197 naira to the dollar last month.
But the lack of liquidity at those levels has curbed activity, leaving the central bank as the main supplier of dollars, traders say.
On the interbank money market, overnight rates has been stuck at a high of 40 percent for much of this week, traders say, as the central bank mops up naira liquidity through treasury bill issues to attract offshore investors into bonds.
The naira traded weaker on the black market to 375 against the dollar on Thursday.