• * Dollar demand falls after CBN’s intervention
• *  Naira remains under pressure in inter-bank market

The Nigerian naira firmed at the official trading window on Monday as U.S. dollar demand eased following several tightening measures by the central bank last week, but the local currency remained much weaker at around Friday’s levels on the inter-bank market.

The central bank sold all the $296.91 million demanded at 149.95 to the dollar against its initial offer of $400 million at the official window. Foreign exchange demand was down sharply from the $591.67 million at last Wednesday’s auction, which were sold at 150 naira to the dollar.

The naira remained under pressure on the inter-bank market, at 162.88 to the dollar by 1156 GMT, with dealers uncertain over sentiment following a week of intense volatility for exchange rates in sub-Saharan Africa’s second-largest economy.

The CBN last week raised its benchmark interest rate by 275 basis points to 12 percent, upped the cash reserve requirement of banks to 8 percent from 4 percent and reduced net open positions lenders can hold as reserves to 1 percent of shareholders funds, from 5 percent.

These measures were intended to reduce the quantity of naira in the system and free up dollar supply after the local currency hit a record low of 167.8 to the dollar on Monday prior to the emergency central bank meeting.

It has also said it will not be allow petroleum dealers to source dollars at its official window for imports and it will limit sales at its auctions to foreign firms taking the currency offshore because they can buy from the inter-bank.

“The various circulars issued by the central bank last week are having positive impact on demand at the official window, but the inter-bank is taken the heat right now due to the reduction in the open position of banks,” another said.

Banks are confused on how to handle the issue of the new open position limit,” another dealer said.

Traders said Chevron oil sold $48 million to some lenders on Monday, but its effect was not felt because market uncertainty.

Central Bank Governor Lamido Sanusi told Reuters on Friday he expected the naira to strengthen this week once central bank measures kicked-in and he saw no reason the local currency couldn’t trade in its preferred 145.5-154.5/$ band.  

Source: Reuters (Reporting by Oludare Mayowa; Writing by Joe Brock; editing by Ron Askew)