Naira Falls amid Dollar Supply Gap





The local currency, the naira depreciated across the official market segments yesterday as dollar supply fell short of the market demand.

Traders said supply from the oil majors are drying up after the month-end sales and the market regulator, the Central Bank of Nigeria (CBN) shrinking its funding of the market.
Naira weakened slightly to N150.30 to a dollar yesterday from N150.20/$1 at the inter-bank market after the CBN underfunded the market.

The market regulator had sold $150 million at a rate of N148.56 at the wholesale Dutch auction system (WDAS) yesterday, which was short of the $183 million demanded by dealers and compared to $160 million sold at N148.52 to a dollar last Monday.

The CBN had sold $159.59 million at N148.52 naira to the dollar at the WDAS on the first of the bi-weekly auction, less than the $200 million offered, compared to $190 million that was sold at N148.60 at the previous auction, last week Wednesday.

Traders said even though there were some dollar sales by energy companies, the value was not significant enough to support the naira across the market segments.

Some of the traders were pessimistic about the naira exchange rate for the rest of this week, especially at the inter-bank market as dollar liquidity declines.

There was noticeable fall in average dollar sales last month, owing to slowdown in economic activities. Analysts said the meltdown resulted in fall in dollar sales in July this year and represented the lowest sales for the year.


The CBN sold $1.61 billion to banks last month, the lowest monthly volume sold by the monetary authority since last January. Demand by banks also dropped in July to $1.8 billion, the lowest since March, when the CBN sold $1.09 billion.

 “Foreign exchange demand and sales are a function of economic activities, the Managing Director of Partnership Investment, Victor Ogiemwonyi, was reported to have said: “What happened last month might be the result of a slowdown in economic activities in the country as companies are complaining that they are not being given loans, and if banks are not giving loans the chances of buying foreign currency are lower.” 

But in most instances this year, foreign-exchange supply by CBN has kept pace with demand.


Source: Thisday





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