The nation’s currency, the naira, on Wednesday weakened across market segments as a result of increased demand by end-users.
At the parallel market, the naira fell by N3.50k or 1.6 per cent against the US dollar while at the inter-bank market it depreciated by N1.02k/$.
After trading on Wednesday, the local currency closed at N223.50k/$ as against N220/$ the previous day, while at the inter-bank market, it closed at N201.84/$ compared to N200.82k/$ traded the previous day.
At the bureau de change segment, the naira lost N4.00k or 1.8 per cent against the dollar as it closed at N222/$ on Wednesday from N218/$ the previous day.
However, three sales were carried out on Wednesday at N198 for a total of $23.76 million, just before the interbank market closed, Thomson Reuters data showed, with dealers attributing trades to a central bank dollar sale.
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Also, an oil company was said to have sold dollars to some lenders on the interbank market below the central bank’s clearing rate. The unit traded at N221 against the greenback at the parallel market, operated by bureau de change agents.
The central bank last week scrapped its bi-weekly currency auctions and a market body said it would sell dollars only at N198, a move that amounts to a de facto devaluation of the currency of Africa’s biggest economy.
Dealers told Reuters that the central bank was not selling dollars to fill dollar demand is described as “ineligible orders”, including payment for credit cards, leaving lenders to source for hard currency elsewhere.
After the forex auctions were scrapped, FMDQ, a group comprising Nigeria’s main lenders and the central bank, said dealers will only be able to buy dollars from the central bank if they have a prior order from a corporate customer, to curb speculation.
The naira crashed through a psychologically important level of N200 to the dollar this month in a rout triggered by weak oil prices and escalating tension over the postponement of a presidential election in Africa’s top oil producer, prompting the central bank to scrap its bi-weekly forex auctions.
At the money market, the overnight tenor of the Nigeria Inter-Bank Offered Rates (NIBOR) on Wednesday rose to 35.95 per cent from 20.08 per cent the previous day, data from Financial Markets Dealers Quotations (FMDQ) revealed.
The money market dealers attributed the increase to lower market liquidity. On Tuesday, the inter-bank rate rose by 54bp as a result of a liquidity squeeze. A report by Ecobank Nigeria noted that despite the opening balances of NGN81.6 billion, the funding requirements arising from inter-bank obligations and transactions weighed on market performance.
According to the report, the CBN’s tightening stance remains active and might be strengthened at the next Monetary Policy Committee (MPC) meeting in March. The MPR will remain above 13% for the months ahead, with the possibility of indirect tightening in the March MPC meeting to support the naira.
