Naira drops on dollar scarcity as CBN plans to raise N1.07bn T-bills

The naira reversed it gain and stability for three day, as it yesterday depreciated in value against the dollar at the autonomous and parallel market following shortage of foreign exchange (FX), BusinessDay findings show.

Consequently, the naira yesterday weakened against the greenback by N5 or 1.59 percent to close at N320/$ against N315/$ the previous day at the autonomous market. It lost N2 or 0.63 percent against the foreign currency yesterday at the parallel market, closing at N322/$ compared with N320/$ the previous day.

However, the local currency closed stable against the dollar at N198.51k at the interbank FX market. Also at the CBN’s clearing rate on the interbank market yesterday, naira remained unchanged at N197/$, data from FMDQ indicated.

The Central Bank of Nigeria (CBN) intervenes at the FX market using foreign reserves. The persistent decline in oil prices coupled with increasing capital reversals significantly impacted external reserves, which decreased from $29,346.62 billion in March 2015 to $27,756.23 billion as of end-January, 2016.

“Notwithstanding the relative success achieved in halting the haemorrhage in reserves through demand management strategies and stoppage of forex to BDCs, the pressure in the forex market remains a concern in the short term,” Joseph Nnanna, deputy governor, financial system stability, CBN, said at the last Monetary Policy Committee (MPC).

Nnanna noted that while the interbank rate slightly depreciated from N196.95/$ to N197/$ between June 2015 and January 2016, the BDC rates depreciated significantly from N237/$ to N267/$ with a spread of N71 during the period under review.

Therefore, while demand management strategies still remain valid in the circumstance, the current incessant pressure on the forex market requires additional proactive market measures to rein in speculative attacks on the naira.

The CBN said yesterday that it planned to raise N1.07 trillion from treasury bills issuance in the second quarter of 2016. It said it would auction N303.77 billion worth of 91-day bills, N169.98 billion worth of 182-day paper and N599.63 billion of one-year paper between March 17 and June 2, 2016. Africa’s biggest economy raised N1.22 trillion from treasury bills in the first quarter, Reuters report.