By  Obinna Chima

The Central Bank of Nigeria’s (CBN’s) defence of the Naira- Nigeria’s local currency, at the regulated Wholesale Dutch Auction System (WDAS) was punctured Monday  as the local currency fell below the benchmark region.

The apex bank had designed a deliberate policy aimed at keeping the local currency within the band of + or – three per cent of N150 to the United States dollar.

Specifically, the local currency which had maintained steady slide against the greenback, slumped further to N155.02 to a dollar at the close of market, at the bi-weekly forex auction. Yesterday’s slide, represented a decline by 61 kobo, compared with the N154.41 to a dollar it stood last Wednesday.

THISDAY checks showed that whereas total demand put up by dealers was $551.275 million, the apex bank maintained its total supply at $350 million.

Experts in foreign exchange market have advised the apex bank to devalue the Naira.  Currency devaluation is a reduction in the value of a currency with respect to other currencies with which that currency can be exchanged.

Head of Research and Strategic Planning, Sterling Capital Limited, Mr. Tayo Omidiji, had urged the apex bank to devalue the local currency.

He had also argued that the huge demand observed at the bi-weekly auction was responsible for the persistent drop in the value of the local currency.

But the CBN insisted that it would continue to defend the local currency at the earlier mentioned region. The CBN had been raising interest rates for more than a year to curb high inflation and support the naira and to allow devaluation now would mark a surprise switch in policy.

“There has been no decision as yet to change stance. We breached the target for the first time in I believe a year. Let’s see how the week goes,” CBN Governor, Malam Sanusi Lamido Sanusi, told Reuters.

Sanusi has said a stable exchange rate is crucial for maintaining price stability and attracting foreign investment.

“I doubt very much it is a deliberate attempt to weaken the naira because this flies in the face of everything they have been trying to do,” Reuters also quoted Head of Africa Research at Standard Chartered, Razia Khan, to have said.

According to Khan: “It may just be a short term reaction to continued elevated demand – changing the price at which forex is available is another means of influencing demand for forex.”

Traders said strong demand for the dollar from gasoline importers and companies building up raw materials inventory continue to put pressure on the local currency.

Source: Thisday