The naira continued its downswing against the United States dollar at the interbank for the third consecutive day as it fell by 90 kobo to close at N158.90 to a dollar, as against the N158 to a dollar it stood on Tuesday.
While some experts attributed the development to increased demand for the greenback by offshore investors who sought to reduce their exposure to the domestic market, others hinged it on rise in demand for the dollar by oil importers.
In all, data obtained from Financial Market Dealers Association (FMDA), showed that the local currency dropped by a total of N1.05 in the last three days.
On the other hand, at the Wholesale Dutch Auction System (WDAS), yesterday, the local currency closed at N155.69 to a dollar, the same value it was on Monday.
But the Central Bank of Nigeria (CBN) increased the volume of dollar supplied to the 19 banks that participated in the auction to $200 million, from $150 million on Monday.
In his opinion, Emerging Markets Strategist, Standard Bank Plc, Samir Gadio, said the naira primarily came under pressure because of increased forex demand from offshore investors that sought to reduce their exposure to the Nigerian market as well as profit-taking by investors.
Gadio revealed that the apex bank had intervened in the interbank market on Tuesday; a move he said, helped in reversing intraday losses on that day.
"The central bank has been virtually out of the interbank market in 2012 and the proactive intervention would indicate that it is somewhat worried about the sudden jump in $/N and will attempt to prevent the build-up of further negative pressure," he explained, in an interview with THISDAY.
On her part, the Sub-Saharan Africa Economist, Renaissance Capital (RenCap), Yvonne Mhango, who also spoke in an interview with THISDAY, said the risk against the naira was gradually building up because some of the fuel importers that did not import the petroleum product, had commenced importation.
"That suggests that we are going to be seeing increased demand for forex and we could see a slowdown in the build-up of the forex reserves we have seen since the beginning of the year," Mhango added.
Commenting on the rise of inflation rate to 12.9 per cent inflation in April, Gadio said the market as well as the apex bank had anticipated the increase.
"In fact, the most likely scenario is still that investors will be gradually positioning for an attractive duration trade going forward given the forthcoming shift to a more accommodative monetary policy stance later this year (if dollar/naira stability is ensured) and a decline in inflation post-third quarter 2012.
"The main intermittent upside risk to bond rates may actually come from the switch auctions planned by the Debt Management Office and designed to exchange liquid on-the-run instruments for off-the-run short term securities, although even this possibility is ambiguous in light of the intrinsic demand for fixed income instruments amid a limited pool of investable assets in Nigeria," he added.