The naira weakened against the United States dollar on the inter-bank market on Monday, on strong demand for the dollar by fuel importers and foreign investors selling down local debt.

The naira closed at N158.90 to the dollar on the inter-bank market, compared with N158.60 per dollar last Friday.

Traders said the naira depreciated and crossed the N159 to the dollar mark in early trade, the same level it had been on Wednesday before the Central Bank of Nigeria intervened by selling dollars to some lenders to calm the market.

The bank’s target band is between N155 and N160 to the dollar.

Reuters quoted a dealer as saying, “The volatility in the market continued today due to unabated demand from importers with the naira falling further. But the intervention by the CBN provided some dollar liquidity in the market to reduce the loss.

The naira, which had consistently stabilised around the N157 to the dollar level for more than three months this year, came under pressure two weeks ago on the back of strong dollar demand by fuel importers and investors repatriating dividends.

Higher inflation has triggered a selloff in bonds by foreign investors in the past week, driving yields up.

Traders said the CBN had intervened more than three times since last week to help calm the market.

Another dealer was quoted as saying, “We see the naira stabilising at this level for the rest of the week as long as the CBN continues to sell additional dollars in the market.”

On the bi-weekly auction, the CBN sold $150m at N155.70 to the dollar, compared with $200m sold at N155.70 to the dollar at last Wednesday’s auction.

Inter-bank lending rates rose last week to an average of 14.66 per cent, from 14.16 per cent recorded the previous week, as cash outflows to bonds and dollar purchases drained liquidity in the market further.

The Federal Government sold N70bn ($440.67m) worth of five-year and 10-year bonds maturing in 2017 and 2022 at its regular auction on Wednesday, while a total of $350m was sold at the bi-weekly foreign exchange auction this week.

Source: Punch