Demand Pressure Weakens Naira at Interbank Market

The naira depreciated further against the United States dollar at the interbank segment of the foreign exchange market yesterday as a result of strong demand for the greenback. Checks yesterday showed that the local currency slipped by 71 kobo to close at N158.10 to a dollar Thursday, compared to the N157.39 to a dollar it stood on Monday.Currency Analysts at the Ecobank Group,  attributed the trend to ‘seasonal month-end pressure.’

Ezun explained: “It is just corporate demand and increased outflow from the market. By next week, the pressure should be over. So, it should be a source of concern to anybody. Also, it has not breached the Central Bank of Nigeria (CBN) band.”

The apex bank sells dollar at the Wholesale Dutch Auction System (WDAS) to keep the local currency around the band of + or – three per cent of N155/$1.

However, at the WDAS held on Wednesday, the naira closed at N155.75 to a dollar. The banking sector watchdog sold a total of $200 million on Wednesday, the highest since this year. Also, the naira was stable at N159/$1 at the parallel market.


“Although the naira has a weakening outlook, the steady rise in reserves to $47 billion (around 10 months equivalent of imports) provides a large cushion to support the naira in the weeks ahead. Over the short term, the naira will likely continue to trade on the interbank market within the CBN’s three per cent band either side of N155/$1,” Ezun added.
The apex bank sold N56.8 billion ($361.4 million) of 87-day and 115- day open market operations (OMO) bills on 25 February 2013. The stop rates were: 9.99 per cent and 10.15 per cent respectively. The Bank also sold N230.9 billion (USD1.46 billion) of 97-, 111- and 118-day OMO bills on 22 February 2013. The stop rates were: 10.04 per cent , 10.15 per cent and 10.19 per cent respectively.

The CBN sold NGN177.09 billion (USD1.12 billion) of 91-, 182- and 364-day NTBs on 20 February 2013 on competitive and non-competitive basis. It was largely over-subscribed. The stop rates were: 9.20 per cent, 9.45 per cent and 9.54 per cent respectively.

The global crude oil price (Bonny Light) was steady above $110.0/bbl on Tuesday, reflecting growing uncertainties in global economy. It closed $114.6/bbl.