Omoh Gabriel
11 December 2008
THE Naira, yesterday, further depreciated against the dollar and other major currencies at the bi-weekly Dutch auction as one dollar was sold to banks at N132.50.
This represents a 4 per cent loss in value for the local currency. The market which had hitherto been waiting for the promised intervention by the Central Bank (CBN) saw the value of the naira drop by N5.5 from the N127 to the dollar it sold for last week.
The dollar was sold at the open market for N128 to the dollar yesterday morning but in the afternoon, when the CBN announced the result of the auction, the open market shivered and raided the stake to N140 to the dollar and N210 to the Pound Sterling.
Operators in the open market said there was a high level of uncertainty in the foreign exchange market as banks are buying to store and are not selling.
One of the operators on Broad Street said because of the uncertainty in the market, they were not too sure of the direction of the exchange rate of the naira to the dollar.
At the official market yesterday, the CBN sold $190 million to banks at its auction which saw the naira depreciating further to N132.50 to the dollar.
The naira had depreciated by about 10 per cent in the last two weeks, throwing Nigeria's interbank market into panic buying of foreign currencies, which had long been used to the naira trading in a tight band against the US dollar.
The amount of dollars sold by the CBN at the auction was not enough to revive the interbank market, which had been shut since the middle of last week. "Demand is still building up and yet the Central Bank is not selling enough dollars to meet all bids at the auction," indicating that the CBN action was influenced by the government to devalue the naira to enable it earn more naira in the face of declining oil prices and falling production levels.
The CBN said, last week, that it was willing to meet all demands for the dollar at a market-determined rate. The regulator has sold about $1.270 billion to banks since last Thursday when it started its intervention to support the naira, but dealers said pent-up demand remained strong.
The interbank market has effectively been frozen since last Wednesday after dollar supply all but dried up as the central bank tried to push through a managed devaluation of the naira.
Foreign exchange dealers are currently holding a meeting to find a way out of the present impasse in the market, one banker said.
The interbank foreign exchange market was frozen since last Thursday as foreign exchange dealers waited to see how the CBN would act to stabilise the naira after it fell sharply against the US dollar.
The CBN Governor, Prof. Chukwuma Soludo, had said last Wednesday that the CBN was ready to intervene from last Thursday to ensure stability after dollar supply dried up amid unprecedented demand and banks stopped quoting spreads.
He had said the CBN would meet all demands at a market determined exchange rate and that the apex bank was ready to buy and sell as necessary.
The naira weakened close to 8 per cent to almost N130 to the US dollar on Tuesday at the open market as dealers digested the impact of the 2009 budget announced by the president and reacted to what appeared to be a managed depreciation of the local currency.
The central bank allowed the naira, broadly stable for months, to depreciate further against the dollar at its bi-weekly auction on Wednesday, selling at between 127-129 compared to around 117 a week ago. It sold only $180 million on Wednesday and $100 million on Monday despite demand of about $2 billion, leaving banks to scramble for dollars from other sources
Meanwhile, indications are that Nigerian oil export markets may be facing some difficulties as the continued lack of details over January loading programmes is said to have kept buyers away.
Be the first to Write a Comment!
Copyright © 2008 Vanguard. All rights reserved. Distributed by AllAfrica Global Media (allAfrica.com). To contact the copyright holder directly for corrections — or for permission to republish or make other authorized use of this material, click here.
AllAfrica aggregates and indexes content from over 125 African news organizations, plus more than 200 other sources, who are responsible for their own reporting and views. Articles and commentaries that identify allAfrica.com as the publisher are produced or commissioned by AllAfrica.
