Following continuous decline in the value of the naira, currency dealers have said that the local currency may depreciate to N163 this week.

The dealers said this on Monday after trading.

The naira weakened against the United States dollar on both the inter-bank market and at Central Bank of Nigeria’s bi-weekly auction on Monday, owing to strong demand for the dollar, with Addax oil selling $7m to boost supply.

The unit traded at N162.95 to the dollar on the inter-bank on Monday, reversing some of the losses it sustained last week when it hit a five-month low. It closed at N162.75 to the dollar on Friday.

At the CBN’s auction, the apex bank sold $300m at N155.90 to the dollar, compared with $300m it sold at N155.85 at last Wednesday’s auction.

Reuters quoted a dealer as saying, “The naira closed lower toward the end of trading due to the absence of CBN’s intervention as expected.”

Dealers added that Addax Petroleum sold $7m, which was not enough to provide support for the currency.

Dealers had expected the CBN to intervene in the inter-bank on Monday to quell dollar demand as it had done in the past, which did not materialise.

Last week, the bank sold an unspecified amount to the inter-bank to help support the naira.

The naira has come under pressure in the past month from foreign investors exiting government bonds to repatriate their returns and from local importers demanding dollars.

Traders said dollar demand from foreign investors exiting the debt market could ease after the local unit of a major international bank repatriated $100m proceeds from bond sales last week, adding that most of the other funds had left.

Another dealer was quoted as saying, “Dollar demand from offshore investors have slowed down and this is could help the naira stablise.”

Inter-bank lending rates inched up slightly to an average of 14.50 per cent last week, compared to 14.25 per cent recorded the previous week, as banks funded their foreign exchange and treasury bills purchases.

The naira has been falling sharply against the dollar in recent weeks, but that has been driven largely by unmet strong dollar demand, rather than readily available naira liquidity.

The Secured Open Buy Back inched up to 14.25 per cent, from 14 per cent the previous week, representing 220 basis points above the CBN’s 12 per cent benchmark rate, and 4.25 percentage points above the Standing Deposit Facility rate.

Overnight placement also closed at 14.50 per cent last week, compared with 14.25 per cent the previous week, while call money rose to 14.75 per cent last week, from 14.50 per cent week.

Nigeria shares proceeds from oil sales from a centrally held account every month to its three tiers of government – federal, states and local – providing liquidity to the banking system which usually pushes down inter-bank rates.

Source: Punch