The naira improved slightly against the United States dollar at the interbank segment of the forex market yesterday as demand for the greenback at the Wholesale Dutch Auction System (WDAS) decreased.
Data made available by the Financial Market Dealers Association (FMDA) showed that the local currency jumped by 36 kobo to close at N156.40 to a dollar, from the N156.76 to a dollar it stood at the end of Tuesday's auction.
On the other hand, at the WDAS, the Central Bank of Nigeria (CBN) sold only $43 million, out of the $100 million it offered the three banks that participated in the auction. The amount supplied by the regulator decreased by $50 million, compared to the $150 million offered on Monday. But the naira maintained its value of N155.77 to a dollar at the CBN regulated forex market.
Analysts at Ecobank Group- Kunle Ezun and Kennet Asenime, in a joint report yesterday, argued that although the outlook for the naira in the short-term was positive given increased reserves, speculation against the naira would likely increase due to the re-opening of the WDAS and 2013 budget liquidity injections. They added: "This increased spending will boost money supply growth leading to price and exchange rate pressures. However, the Monetary Policy Committee's (MPC's) meeting of 21 January will likely hold the policy rate at 12 per cent to support liquidity management efforts.
"The naira is likely to remain under pressure with an ongoing weakening bias due to structural imbalance between dollar supply and demand."
Nigeria's external reserves stood at $44.653 billion as at January 8, 2013, according to the CBN. The liquidity management office sold N133.85 billion of 101-day and 129-day Open Market Operations bills on 7 January 2013. It offered N50 billion apiece and sold N50.29 billion of 101-day and N83.55 billion of 129-day at 13.25 per cent and 13.27 per cent stop rates respectively.