The Central Bank of Nigeria sold a total amount of $1.847bn foreign exchange at the Wholesale Dutch Auction System in February, compared to $1.919bn recorded in January.

The figure, according to the latest data on the CBN’s website, represents a decline of 3.75 per cent from the January figures.

The CBN sells forex to banks at its bi-weekly forex auction as part of monetary control measures to help banks to manage their liquidity.

Analysts at Financial Derivative Company Limited said in their Economic Monthly Publication that the reduced demand for forex had significantly led to the appreciation in naira value.

The report said, “Though the total demand for forex is not available, it is clear that there has been significant reduction in the demand for forex.

“This reduction in demand is also the resultant effect of the fuel subsidy probe in the oil companies operating in Nigeria. The reduction in demand alongside the fuel subsidy reduction has contributed to the reduced volatility recorded in the forex market. The sale of dollars by multinationals has helped to keep liquidity in the forex market in check.”

The analysts noted that the exchange rate adjustments had started taking place, and it was expected to continue even as naira depreciation slowed further.

The publication said, “A stable naira is expected to have positive impacts on inflation, through a reduction in Nigeria’s import bill as an appreciating naira implies a lower import bill. The wider implication is that a stable currency will maintain consumer purchasing power and provide corporations with sufficient reason to continue production for the domestic market.”

Meanwhile, average inter-bank rates declined by 18 basis points to 14 per cent in the month of February. Open Buy Back and Overnight rates declined by 29 points and 37 points, to close the month at 12.71 per cent and 13.46 per cent, respectively, the report also indicated.

The seven-day and 30-day rates recorded declines of an average of 29 points and eight points to close at 14 per cent and 14.67 per cent, respectively. However, the 60-day rate rose marginally by nine points to 15.17 per cent.

The Federal Accounts Allocation Committee recently disbursed N614bn, 9.8 per cent above N559.1bn disbursed in December 2011, to the three tiers of government for January.

Source: Punch/Ademola Alawiye