The increasing pressure on the naira may have made the Central Bank of Nigeria’s weekly dollar sale at the Retail Dutch Auction System to increase by 260.5 per cent, according to the central bank’s statistics.

The data indicated the central bank offered a cumulative total of $3bn to defend the nation’s currency at the RDAS in January this year, while it offered only $832m within the same month last year.

The statistics showed that the central bank offered $3bn in eight regulated auctions through the RDAS.

Of this amount, over $2.95bn was bought by dealers at the Foreign Exchange Dutch Auction System.

The auctions were held on January 6, 8 13, 15, 20, 22, 27, and 29, 2014, with the central bank offering $350m, $400m, $350, $350, $350, $400, $400 and $400, respectively.

In contrast, the CBN offered a total of $832m in eight regulated auctions in January last year.

It offered $150, $100m, $50m and $120m, $100, $150, $150m and $12m on January 7, 9, 14, 16, 21, 23, 28 and 30, 2013, respectively. Of the amount, only about N700m was bought by foreign exchange dealers.

Analysts had said that the naira would come under intense pressure this year as the nation prepared for the general elections next year.

The Managing Director, Financial Derivatives Company Limited, Mr. Bismarck Rewane, was one of those who said the naira would come under intense pressure this year.

Rewane said new members of the Monetary Policy Committee would need to find a way to support the currency.

He said, “I don’t want to use the word devaluation but I surely know that the currency will come under pressure.

“I know that the monetary policy in 2014 will change in line with the new players in the MPC.

 “I think we will have a higher rate of inflation; the rate of inflation will increase a bit; it could be anything between nine and 10 per cent because of the pressure on the naira. That will translate into higher prices.

“There will be a bit of pressure on the naira; there will be increased money supply. There will be wage pressure.

“Alternative cost of energy will be a determinant now that the power sector has been privatised; there will be higher tariff, which will determine inflation.”

In a bid to save the naira from devaluation last year, the CBN defended the currency with about $26.6bn from the nation’s external reserves.

The bank had sold about $26.6bn to currency dealers in 94 Foreign Exchange Dutch Auctions between January and December 2013.

The amount ranged from $12m (in the early part of the year) to $400m towards the end of the year.

It sold about $19.8bn to currency dealers in 72 auctions through the Wholesale Dutch Auction System between January and September last year, while it offered $6.8bn to the dealers in 22 auctions through the Retail Dutch Auction System between October and December.

The CBN had on October 2 last year replaced the WDAS with the RDAS because of the ineffectiveness of the former in order to address the hitches in the foreign exchange market.

The CBN data showed that last year, the central bank sold the highest amount of dollar in the month of July, offering $3.3bn; while it offered $832m in January, the least for the year.

The lower demand at the early part of the year was due to high foreign portfolio inflows into the country for investment in bonds and later equities, analysts said.

Other analysts linked the trend to the fact that the naira did not experience much pressure during the early part of last year compared to the later period.

According to the CBN, the official exchange rate in January of last year was N155.77 to the dollar, while the rate currently is N155.70 to the dollar.

Industry observers said although there was a little volatility during the year, the rate was relatively stable.

Source: Punch (by Oyetunji Abioye)