Naira notes

By  Obinna Chima

The naira improved significantly by N1.15 against the dollar at the interbank segment of the forex market to close at N161.55 to a dollar yesterday, compared with the N162.70 to a dollar it attained the previous day.

Dealers attributed the performance of the local currency at the interbank market to forex sales by Shell Nigeria and the Nigerian Liquefied Natural Gas (NLNG) company to some banks.

These, the dealers argued, improved dollar liquidity in the market.

However, the Central Bank of Nigeria (CBN) yesterday increased it supply of the greenback at the second session of its bi-weekly auction held yesterday to $250 million, compared with the $200 million it offered on Monday.

Although the regulator again, did not disclose the amount of dollar that was demanded by dealers at its regulated Wholesale Dutch Auction System (WDAS), THISDAY gathered that the local currency fell slightly as a result of an increase in amount that was put up by dealers.

Consequently, the naira fell by 16 kobo at the WDAS to close at N156.85 to a dollar, as against the N156.69 to a dollar it was on Monday.

Attempt by THISDAY on Monday, to find out why the apex bank had not been publishing the amount demanded by dealers like before, was abortive as the CBN failed to respond to the enquiry.

The CBN has offered a total of $200 million on Monday to  13 banks that participated in the auction, while total amount sold was $198.128 million.

Emerging Markets Strategist, Standard Bank Plc, London, Samir Gadio, predicted that the naira would fluctuate around N160/$ in the foreseeable future assuming the oil price remains relatively robust.

Gadio added in a report e-mailed to THISDAY yesterday that: “The CBN had moved the mid-point of the $/N target to N155/$1 (from 150) in late 2011, aligning it with the exchange rate assumption of the 2012 budget. It also tightened the requirements for participation at the WDAS, which has, however, placed incremental pressure on the interbank forex market. As a result, the CBN has also become a major player in the interbank market as it seeks to control the spread between the two exchanges rates.

“The CBN is committed to exchange rate stability since a sizeable depreciation would not improve external competitiveness and result in a spike in imported inflation. On the upside, a rebound in forex reserves (via increased fiscal savings and the launch of the sovereign wealth fund) would certainly support the naira.”