The naira suffered a renewed setback yesterday, shedding six kobo at the Wholesale Dutch Auction System (WDAS) to close at N155.90 to the dollar.
Analysts say the continued pressure on the naira is as a result of increased demand for dollar at the foreign exchange (forex) market, occasioned by release of subsidy for importation of petroleum products.
The naira continued to depreciate despite efforts taken by the Central Bank of Nigeria (CBN) to contain it within the band of plus or minus three percent of N155. Last week, the apex bank increased forex supply to $600 million, the highest since February this year without any evidence of the naira strengthening.
Yesterday, the apex bank supplied and sold $300 million, but, apparently failed to meet demand as the naira slumped from N155.84 to N155.90 to the dollar.
At the foreign exchange auction held last week Monday, June 4, 2012 the CBN offered a total of $300 million. The total sale was the same as the amount offered. On Wednesday, June 6, 2012 the CBN offered and sold a total of $300 million. In all a total of $600 million was offered and sold by the CBN during the week.
The value of naira, thus last week depreciated in the official, inter-bank and the parallel market segment of the foreign exchange market.
during the week.
At the official market the naira depreciated by 9 kobo to close at N155.84/$, compared with the previous week’s rate of N155.75/$. At the parallel market, it depreciated by 220 kobo to close at N164/$, compared with the previous week’s rate of N161.80/$, while at the Inter-bank market, it depreciated by 215 kobo to close at N162.75/$, compared with the previous weeks rate of N160.60/$.
Analysts fear the nation’s foreign reserves will be at risk, if the central bank insists on maintaining the band by withdrawing from forex reserve to back up the naira.
But at the inter-bank market, data compiled by Bloomberg said, the naira appreciated the first time in three days on speculation central bank will increase dollar sales to support the currency.
The naira strengthened 0.1 percent to 162.87 per dollar.
“In the absence of any external dollar inflow, we expect the central bank to lean on the external reserve to defend the naira,’’” analysts at Lagos-based Cowry Asset Management Limited, led by Edgar Ebinum, assured its clients yesterday.
The regulator, which will sell the U.S. currency at an auction today and on June 13, is working to keep the naira within a three percent band around 155 per dollar at its auction to stabilize the currency.
Foreign-exchange reserves rose to $37.7 billion by June 4, compared with $32.9 billion as of December 29.
“We expect dollar vs naira exchange rate to remain above 160 in the near-term unless the central bank intervenes aggressively,” Celeste Fauconnier and Nema Ramkhelawan-Bhana, strategists at Rand Merchant Bank, wrote in a report today.
The yield on Nigeria’s domestic bonds due 2018 rose three basis points to 15.61 percent, according to the June 8 data on the Financial Markets Dealers Association website. Yields on the nation’s $500 million of Eurobonds due 2021 fell 13 basis points to 5.457 percent.
A “re-emergence of crisis in Europe” put pressure on the naira, central bank Governor Lamido Sanusi said May 22 after the regulator left its benchmark interest rate on hold for a fourth consecutive meeting at a record 12 percent.