The value of the naira dipped against the United States dollar at the three segments of the forex market Monday due to strong demand for the greenback.
In fact, an intervention by the Central Bank of Nigeria (CBN), which increased dollar supply at its regulated Wholesale Dutch Auction System (WDAS) by 200 per cent was unable to save the naira.
Specifically, at the interbank market, the local currency slipped by 31 kobo to close at N157.86 to a dollar yesterday, compared with the N157.55 to a dollar it closed on Friday.
Similarly, at the parallel market, the local currency was hurt by 70 kobo as it fell to N159 to a dollar Monday, as against the N158.30 to a dollar it stood last week.
In the same vein, at the WDAS, the local currency shed one kobo to close at N155.75 to a dollar yesterday, as against the N155.74 to a dollar it closed at the end of the previous auction.
The central bank offered a total of $150 million, which was completely sold to the 18 banks that participated in the auction. This showed an increase by $100 million, in the amount of the greenback offered, compared with the $50 million it offered last week.
Dealers said the apex bank increased its supply due to an increase in demand for the greenback. This, according to them, might continue as importers and traders commence importation of goods and services in preparation for the yuletide.
Fixed Income and Currency Analysts, Ecobank Group, Kunle Ezun and Kenneth Asenime, in a joint report yesterday, the naira is likely “to remain under pressure with an ongoing weakening bias due to fiscal laxity and a structural imbalance between dollar supply and demand.”
They added: “The foreign reserves rose $42.7 billion on November 8 and might be stable in the near term. The trend in naira strengthening since mid-June reflects sufficient CBN supply of dollar and robust capital inflows seeking to buy high yielding government securities.
“Although, the CBN indirectly tightened access to dollar at the Monetary Policy Committee (MPC) meeting on 24 July, and further reinforced by the circular issued on 1 August, the impact has been limited because of high dollar demand.”
However, in a separate report, Managing Director/Chief Executive Officer, Financial Derivatives Company Limited, Mr. Bismarck Rewane, argued that the naira would find its true value based on the relative inflation rates between the United States (US) and Nigeria.
“We expect the naira to trade horizontally as traders square their position ahead of the MPC meeting. The appreciation of the naira will also help in moderating inflationary pressures by bringing down the naira cost of imports, especially of commodities,” Rewane added.