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Naira Falls on Demand Pressure as WDAS Reopens

08 Jan 2013

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Naira notes

Obinna Chima

The naira slipped against the United States dollar at the interbank segment of the forex market Monday  on increased demand for the greenback.

The Central Bank of Nigeria (CBN)-regulated Wholesale Dutch Auction System (WDAS) which was shut down on December 19, last year, due to the Yuletide celebration was reopened Monday.

Dealers said that the demand pressure observed at the market was as a result of the reduction in the amount of dollar offered by the central bank at the WDAS. This, according to them led to.

According to data made available by the Financial Market Dealers Association (FMDA), the local currency depreciated by 91 kobo at the interbank to close at N157.40 to a dollar Monday, lower than the N156.49 to a dollar it closed last Friday.

On the other hand, at the WDAS, the central bank sold a total of $150 million to dealers, compared to the $300 million it offered at the last auction for 2012.

Meanwhile, the FMDA Monday disclosed that the WDAS experienced lower market demand in December compared to the preceding month.

The FMDA which disclosed this in its monthly report for December said: “The apex bank offered$1.020 billion and sold $990.34million in relation to $1.250 billion offered and $1.229 billion sold in November 2012, reflecting a decrease of 18.4 per cent and 19.4 per cent percent respectively.

“Amid the end-year closure of the CBN WDAS window in the third week, complementary and progressive inflow from energy companies estimated at $800.50 million proved sufficient to tame demand backed by the August 1 policy barring which had helped to limit speculative activities. We hope to see this trend maintained in the coming months following the CBN’s price stability policy and the relative depth of the Nigerian Foreign exchange and Debt markets.”

According to the report, the premium between CBN and Parallel market as at end-December increased to 3.29 per cent from 2.08 per cent recorded at the end of November 2012.

“The above premium is 171 basis points below the international benchmark of five per cent which has demonstrated the CBN’s capacity to tame further volatility in the bud and to avoid speculators from having a field day.

“In general, given the positive developments in the interbank forex market, the naira is expected to firm in the coming months,” it added.

Tags: Business, Nigeria, Featured, Naira, Pressure, WDAS

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