The naira fell to its lowest level in two months against the U.S. dollar on Wednesday, as the sale of greenbacks by state-owned energy company NNPC failed to meet market expectations.
Traders said NNPC sold around $300 million to some lenders, but this was not enough to give support to the local currency.
The naira closed at 162.87 to the dollar, compared with Tuesday’s close of 162.80. It was the lowest level seen since July 2, when the local currency closed at 163.10 to the dollar.
“A lot of demand targeted at the NNPC dollar sale hit the market, reducing the impact of the fresh dollar flow and weakening the naira further,” one dealer said.
Dealers said some lenders took the opportunity of the NNPC sale to cover their short positions, which left the market with little left to meet growing demand from importers and other foreign exchange end-users.
The local unit had fallen to a 7-week low on Tuesday, hit by strong dollar demand and a squeeze in availability of the U.S. currency.
“Unless we see further dollar flows from offshore investors buying local bonds, and from some oil companies yet to sell dollars in the market, the naira will cross the 163 to the dollar mark soon,” another dealer predicted.
NNPC accounts for the bulk of dollars traded on the interbank market.