TUESDAY, 27 JULY 2010 BY TOSIN FODEKE

 

The naira gained strength at the foreign exchange market yesterday, following sufficient supply by the Central Bank of Nigeria (CBN), but weakened at the interbank market due to banks’ reluctance to sell dollars in the market.

 

At the Whole Dutch Auction System (WDAS) market, CBN sold $200 million at N148.67 to the dollar on Monday, almost meeting demand, compared to $205 million at N148.72 a dollar on last week Wednesday.Also, against the Euro, the naira steadied to N191.14 from N191.25, and also maintained same against the pounds sterling at N226.73 N226.90.

 

At the interbank market however, the naira weakened to N150.30 to the U.S. dollar yesterday from N150.05 last week.Nigeria National Petroleum Corporation (NNPC), sold $250 million to some lenders yesterday, while Chevron sold $33 million and Royal Dutch Shell offloaded an unspecified amount to the market. But these failed to lift the local currency against the dollar.

 

“The naira fell at the interbank because many of the banks that won NNPC money refused to sell in the market, preferring to use it to meet their customers obligations,” one dealer said.Traders said there was also higher demand for the dollar as some lenders were building up reserves.Traders said the naira could appreciate slightly today and Wednesday if more energy firms sold dollars. Oil companies regularly sell dollars towards the end of the month to meet their local funding obligations.

 

Last month, the naira rose to its highest level in three months, N150.05 to the U.S dollar, after some energy firms sold about $192 million at the interbank this week, traders said.“There have been some dollar inflows from energy majors’ month-end sales since last week, which has increased liquidity in the system and provided support for the naira,” one dealer said.Dealers said Chevron and Total sold $78 million and $22.50 million respectively on Tuesday, while Mobil was expected to sell about $92 million on Wednesday.

 

Some oil companies, including NNPC, had sold a total of $410 million last week, helping the naira to appreciate rapidly.The currency also firmed at the official window after the central bank sold $250 million at 148.50 per dollar compared to the peak demand of $262.64 million, and to the $250 million it sold at 148.55 a dollar on Monday.Traders said other energy firms expected to sell the greenback this week were waiting for the naira to appreciate further before they come to the market.

 

Source:Guardian