Monday October 24, 2011 2:09pm
LAGOS Oct 24 (Reuters) - The Nigerian naira weakened against the U.S dollar at the official window and on the interbank market on Monday as increased demand squeezed greenback supply.
The local currency closed at 160.20 to the dollar on the interbank market, weaker than 159.20 at Friday's close.
At the official window, the central bank sold $350 million at 150.01 to the dollar, short of the $421.25 million demanded. The regulator sold $250 million at 149.95 to the dollar at its last auction on Wednesday.
"Demand for the dollars seems to be rising again despite various measures by the central bank to curb demand at its auction," one dealer said.
Nigeria's central bank on Friday said it will sell dollars both directly into the market and at auctions, and raised the forex net open position limit of lenders to 3.0 percent from 1.0 percent of shareholders' funds.
Net open position is the amount of dollars banks can hold relative to shareholders' funds. The central bank lowered it to 1 percent from 5 percent on Oct. 10 to free up dollar supply to the interbank market but traders complained the market was almost brought to a halt by the decision.
"With the increase in net open position, which became effective today, a number of banks were buying up dollars to cover their position, putting pressure on the market," another dealer said.
Traders said the naira could depreciate further in the week unless the central bank injects more dollars into the market or dollar inflows from month-end sales by energy companies come in.
Source: Reuters (Reporting by Oludare Mayowa)