Central Bank sells $11bn in six months


By Stanley Oronsaye July 9, 2010 12:40AM 


The Central Bank of Nigeria (CBN) sold a total of $11.16 billion (about N1.7 trillion) during the first half of the year, which represents an average of $247.89 million per auction sold at the bi-weekly Wholesale Dutch Auction System (WDAS) during the period.


Figures released by the Central Bank show that $12.99 billion was sold at 70 daily and bi-weekly Retail Dutch Auction System during the corresponding period of 2009.


Average demand

According to the CBN, average demand for foreign exchange in June stood at $315.73 million while average sales amounted to $297.69 million, representing sales as percentage of demand of 94.29 percent.


In May, average forex demand stood at $459.26 million per auction, with average sales of $394.45 million, representing sales as percentage of demand of 85.89 percent. This represents a resolve to meet forex demand in a bid to forestall the depreciation of the naira.


Lamido Sanusi, the Central Bank governor, said between May and June, the naira appreciated by six kobo or 0.04 percent at the official market, compared to a depreciation of 0.4 percent at the bureau de change market in June at the end of the Monetary Policy Committee (MPC) last Monday.


Mr. Sanusi added that the WDAS and interbank segments of the foreign exchange market witnessed mild naira exchange rate appreciation, while the bureau de change segment experienced mild depreciation. He said the stability of the naira exchange rate attained in the foreign exchange market since the first half of 2009 continued in the first half of 2010.


“The committee observed that the naira exchange rate has remained stable in all segments of the market during the review period, reflecting increased confidence in the naira and the efficacy of the current exchange rate policy stance.


“It believes that the relative stability in the foreign exchange market is likely to be sustained in the near term,” he stated in the communiqué released at the end of the 71 Monetary Policy Committee meeting in Abuja on Monday.


Comfortable value

Sanusi told Bloomberg recently that he is “comfortable” with the current value of the naira and that the currency is not likely to come under pressure, with foreign reserves capable of funding 16 months of imports. This is compared to the internationally recommended benchmark of three months. Foreign reserves, which stood at $38.82 billion as at 31 May, dropped to $37.63 billion on 23 June.


Razia Khan, head of macro-economics and regional head of research, Africa, at Standard Chartered Bank in London, said maintaining a stable foreign exchange policy remains the best bet for mitigating any potential price pressures.


“The decline in reserves in response to increased forex demand is evidence of the authorities’ resolve to maintain currency stability, although markets will also focus on efforts to drain liquidity through increased treasury-bill issuance,” she said.





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