By Okechukwu Nnodim with agency report

The naira fell to its weakest in almost two months against the United States dollar on the inter-bank market on Monday after the Central Bank of Nigeria removed restrictions on the amount of dollars lenders could sell to operators of Bureau De Change.

The apex bank had on Friday lifted the $1m limit previously declared as maximum amount to be sold to BDCs from autonomous funds per week by authorised dealers.

According to the financial institution, the initiative is taken after it meticulously observed happenings in the foreign exchange market.

The development, however, prompted a rush of demand for the dollar on the inter-bank market and forced the naira to depreciate.

Reuters reported that the naira closed at N155.95 to the dollar on the inter-bank market on Monday from N153.70 to the dollar as at Friday, and this was despite that the CBN failed to meet all demand at its bi-weekly auction.

At the official window, the apex regulatory bank sold $400m at 151.85 to the dollar, short of the $562m demanded but higher than the $350m it sold at 151.35 to the dollar last Wednesday.

Dealers said Nigeria Liquefied Natural Gas company sold some dollars to selected lenders on Monday, but not enough to support the naira.

“The lifting of the restrictions on the volume of dollars bureaux de change could purchase from banks and the large unmet demand at the official window put pressure on the naira at the inter-bank market,” one dealer said.

Dealers said the naira should continue to fall against the dollar unless the CBN raise supply at its next auction and some energy firms sell dollar at the inter-bank.

“There is likely to be more pressure on the naira at the inter-bank with the removal of restriction on volume of dollar sales to bureaux de change until oil companies begin their month-end dollar sales to banks,” another dealer said.

CBN had last month imposed a limit of $1m per bureau de change from the inter-bank in a move to reduce pressure on the naira, but the measure failed to stem strong demand for the greenback causing the regulator to review its directive.

Source: Punch