By Ademola Alawiye with agency report

Tuesday, 18 Jan 2011

The Nigerian naira dropped slightly against the United States dollar on Monday at the inter-bank and official market.

The local currency depreciated to N153.37 to a dollar at the market on Monday, from N153.30 on Friday, after the Central Bank of Nigeria failed to meet all demand at its bi-weekly auction.

The CBN sold $300m at N150.31 to a dollar, compared to $350m sold at N150.01 to the dollar last Wednesday.

Dealers at the market said the local currency would likely grow stronger again after dollar sales by Etisalat Nigeria and First Bank of Nigeria Plc.

Reuters quoted dealers as saying, “The naira would have weakened further if not for dollar sales by First Bank, which boosted dollar liquidity and steadied the market.

“The market is currently liquid due to large dollar sales by telecoms firm, Etisalat, on Friday and sales by First Bank on Monday. The naira will be firm before the next CBN forex auction on Wednesday.”

Etisalat had sold about $150m to some lenders on Friday.

Aggregate demand at the four foreign exchange auctions so far this year stood at $1.68bn against the $1.2m sold by the CBN.

Inter-bank lending rates, last week, rose to 9.25 per cent on average, compared to six per cent recorded the previous week, as large cash withdrawals by the Nigerian National Petroleum Corporation drained liquidity in the system.

The secured Open Buy Back rose to 8.25 per cent from five per cent, 200 basis points above the Central Bank of Nigeria’s 6.25 per cent benchmark rate and 500 percentage points above the Standing Deposit Facility rate.

Overnight placement inched up to 9.50 per cent, from six per cent, while call money traded at 10 per cent against seven per cent last week.

The CBN Governor, Mr. Lamido Sanusi, had said that he expected the Nigerian naira to remain stable against the dollar in the short term.

Sanusi said, “There will be foreign exchange stability in the near term. I expect the naira to remain steady against the US currency in the short term.”

Source: Punch