The naira slipped slightly against the United States dollar at the interbank segment of the forex market Monday as demand for the greenback outstripped supply.
Data made available by the Financial Market Dealers Association (FMDA) showed that the naira declined by 12 kobo to close at 157.67 to a dollar, lower than the N157.55 to a dollar it closed on Friday.
However, dealers revealed that Addax petroleum sold about $10 million to some banks yesterday, which failed to lift the local currency.
On the other hand, at the Central Bank of Nigeria (CBN)- regulated Wholesale Dutch Auction System (WDAS), the apex bank sold only $130.334 million out of the $180 million it offered the 15 banks that participated in the auction. The (CBN) had sold $200 million at the previous auction held last Wednesday. The naira was stable at the end of the auction as it closed at N155.78 to a dollar same amount it was last Wednesday.
The performance of the forex market this week will be largely influenced by the outcome of the Monetary Policy Committee (MPC) meeting which ends today. Inflation rate decelerated to 11.7 per cent in August, from 12.8 per cent in July.
Meanwhile, the Regional Head of Research, Africa, Global Research, Standard Chartered Bank, Razia Khan, has said that despite seeming improvement in inflation as well as recent naira stability, which has given new impetus to calls for some interest rates easing, “we think there are important reasons why interest rates are unlikely to change.”
According to her, prior to the announcement of Nigeria’s potential inclusion in JP Morgan’s index, the naira had come under pressure in July.
“We still have a tough time understanding Nigerian inflation trends. Suffice it to say that our charts of headline and food Consumer Price Index (CPI) for Nigeria look meaningfully different to any of the other markets under coverage for sub-Saharan Africa.
“How much therefore should everyone focus on one or two months of inflation data as a pointer to the monetary policy decision? We would look at other factors too,” Khan added.
Continuing she said: “The worst of the volatility in the interbank market appears to have settled. But this does not necessarily imply that easing should be imminent. Despite Nigeria’s potential index inclusion, which has led to strong inflows allowing the currency to strengthen, global risks remain.
“Any downside shock to oil prices would still leave Nigeria vulnerable. Plus, oil output seems to have disappointed further in second quarter. We expect the emphasis on rebuilding foreign exchange reserves to more comfortable levels to remain in place.”