Nigerian naira falls vs dollar on strong dollar demand
Wednesday Deceember 7, 2011 2:05pm
The Nigerian naira weakened against the U.S dollar on the interbank market and bi-weekly forex auction on Wednesday, with the auction, a separate central bank intervention and dollar sales from a gas firm all failing to meet robust demand.
The local currency closed at 161.80 to the dollar on the interbank market, compared with 161.55 at Tuesday's close.
"As you can see, the demand at the official window is not a true reflection of what is happening in the economy. There is latent demand for the dollar, which is putting pressure on the local currency at the interbank market," one dealer said.
Traders said the central bank official continue to advice banks on the amount of dollars to be demanded and rate quote to reduce pressure on the bi-weekly auction.
The central bank sold only $200 million at 156.70 to the dollar on the bi-weekly auction on Wednesday, short of the $245 million demanded but at par with the $200 million sold at 156.50 a dollar on Monday.
Nigerian Liquefied Natural Gas (NLNG) company sold unspecified amount of dollars to some lenders, while the central bank also intervened at the interbank market toward the end of business, but not enough to calm the market.
"The market failed to react to the inflows from the gas company and direct sales to some banks by the central bank because of strong demand in the market," another dealer said.
Traders said the naira will continue to depreciate in the near term unless there is a large dollar inflow from the oil companies or the central bank to increase the volume of direct sales to banks.