The naira was stable against the dollar at the Central Bank of Nigeria's (CBN's) bi-weekly auction Monday as the regulator raised its supply of the greenback by 108 per cent to N250 million.
The apex bank had offered a total of $120 million at the previous auction held last Wednesday.
The naira closed at N155.80 to a dollar, the same amount it was last Wednesday. Demand for the greenback has been on the decline since last month.
However, at the interbank, the local currency advanced marginally by 10 kobo to close at N157.90 to a dollar yesterday, compared with the N158 to a dollar it closed on Friday.
The naira has enjoyed relative stability due to the further aggressive tightening measures adopted at the last Monetary Policy Committee meeting where the cash reserve requirement (CRR) was raised to 12 per cent from eight per cent
Dealers revealed that some local units of foreign banks supplied some undisclosed amount of the greenback to the market Monday.
The dealers also predicted that the local currency will continue to hover around the present band because of the tradition forex supply by multinational oil companies by the end of the month to meet their obligations in the country.
FSDH Securities Limited forecast that the exchange rate would trade at about N167.20/$1 to end the year. It however argued that the intention of the CBN to achieve an exchange rate around N155/$1 to end the year "will not permit this wide deviation."
It added: "We note that with oil price around $100 per barrel, oil production at about 2.4million barrels per day and high yields on fixed income securities in the local market, drop in forex demand from oil marketers, Nigeria should maintain a relatively stable exchange rate in 2012. The possibility of marginal depreciation cannot be ruled out. We expect the exchange rate in the region of N158.50/$1 to end the year.
"If oil price remains at around $100 per barrel, there may not be need for the federal government to grow its debt portfolio excessively, but may grow it aggressively if oil price fall sharply. We expect oil price to remain somewhat high, thus we think public debt will only grow by about 6.53 per cent in 2012 to about N7.34 trillion. The growth in debt will partly be driven by the current high interest rate that government is paying on its domestic debt."