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Nigerian naira weakens on strong forex demand

Category: Money Market

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Nigerian naira weakens on strong forex demand

Wednesday October 26, 2011 2:33pm


The Nigerian naira currency eased further against the U.S dollar on the interbank market on Wednesday as end-users excluded from the bi-weekly auction bid for available dollars. 


The naira closed at 159.90 to the dollar on the interbank market from 157.60 naira on Tuesday.


On the official window, the central bank sold all of the $345.12 million demanded at 150.05 to the dollar compared to $350 million sold at 150.01 to the dollar on Monday.


Traders said the regulator also sold dollars directly to some lenders on Tuesday as part of its regular intervention in the market, which helped the naira to gain temporarily on the interbank market, but it weakened later as no further dollar inflows hit the market.


"We are having increased demand at the interbank for dollars because of the decision of the central bank to exclude some oil companies from the bi-weekly auction, yet there have not been commensurate inflows into the market," one dealer said.


The central bank two weeks ago stopped petroleum dealers sourcing dollars at its official window for imports and restricted sales at its auctions to foreign firms taking the currency offshore because they can buy from the interbank.


Dealers said the series of measures by the central bank to curb forex demand at its auction are squeezing greenback supply      at the interbank.


"The market remain a bit erratic because of tight dollar inflow, people are unwilling to give quote for the fear of trading below the market," another dealer said.


Traders said the naira may not trade above the 160 naira mark this week as the regular dollar sales by the central bank to some lenders will continue to provide some liquidity until month-end oil companies dollar inflows start coming in.


Source: Reuters (Reporting by Oludare Mayowa)


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