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Naira Gains Marginally as CBN Closes WDAS

20 Dec 2012

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Naira and Dollar notes

Obinna Chima
 
The naira pared the losses recorded against the United States dollar in the first two days of the week as it appreciated slightly due to an increase in supply of the greenback by the Central Bank of Nigeria (CBN).

The apex bank also officially ended forex auction at its regulated Wholesale Dutch Auction System (WDAS) for the year yesterday due to the Yuletide festivities.

Specifically, the local currency gained 12 kobo to close at N157.97 to a dollar, compared to the N158.09 to a dollar it closed on Tuesday.

Due to the seasonal dollar demand, the apex bank increased its supply of the greenback to $300 million, at its last forex auction for 2012 as against the $200 million sold at N155.77 to a dollar on Monday.

Analysts however expressed concern that Wednesday’s closure of the Wholesale Dutch Auction System (WDAS) for the year may create a major shortfall in dollar supply.

The naira had depreciated by 0.1 per cent at the Interbank (2.5 per cent year-to-date) on Tuesday partly due to increased corporate demand for dollar to cover import bills.

A joint report by Kunle Ezun and Kenneth Asenime of the Ecobank Group said: “Although the CBN’s liquidity management efforts remain active, the proposed closure of the twice weekly CBN WDAS auction on December 19 is likely to create a major shortfall in dollar supply, thereby jeopardising recent exchange rate stability.

“Nonetheless, the naira outlook appears more certain over the short term given increased reserves, the recent affirmation by Fitch of the BB- rating and the Monetary Policy Committee’s decision to leave the Monetary Policy Rate (MPR) unchanged at 12 per cent on 20 November. The NGN is likely to remain under pressure with an ongoing weakening bias due to structural imbalance between USD supply and demand.”

The CBN sold N167.8 billion of 112-day and 119- day Open Market Operation (OMO) bills on 13 December 2012. It had offered N50 billion and sold N63.4 billion of 112-day at 13.34 per cent stop rate. It had also offered NGN50 billion n sold NGN104.4 billion of 119-day at 13.4 per cent stop rate.

Meanwhile, data from the Financial Market Dealers Association (FMDA) showed that interbank rates declined further Wednesday.

According to the FMDA, while the Overnight tenor climbed to 10.50 per cent, the 7-day tenor also closed at 10.96 per cent. Similarly, just as the 30-day tenor fell to 12.08 per cent, the 60-day tenor to 12.46, the 90-day tenor also declined to 12.87 per cent.

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

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