Naira on Wednesday depreciated by N1.00k/$ or 0.5 percent against the US dollar at the inter-bank foreign exchange market in spite of $173.6 million sale by the Central Bank of Nigeria (CBN).
After trading on Wednesday, the local currency closed at N190.10k/$ compared to N189.10k/$ the previous day, data obtained from Financial Markets Dealers Quotations (FMDQ) indicated.
The inter-bank forex depreciation was driven by stronger than expected USD demand to cover import bills (energy and manufacturing sectors) and capital flight ahead of the elections, Kunle Ezun, analysts at Ecobank Nigeria said in a market commentary.
Meanwhile, the CBN on Wednesday offered a total of $200 million but sold a total of $173.6 million to some deposit money banks at the rate of N168/$.
There was delay at the start of trading yesterday as currency dealers met to assess market conditions and liquidity.
No central bank official attended the meeting called by the Financial Market Dealers Association (FMDA), an association of lenders, discount houses and investment banks, dealers told Reuters.
Read also: CBN injects $242.04m, CNY32.3m into forex market
“We know that liquidity is tight … there’s a lot of engagement with the central bank. We discussed events that have happened in the past one week,” one of the dealers who attended the meeting told Reuters.
Dealers said they also discussed Nigeria’s dependence on foreign currency to import for almost 80 percent of what it consumes.
Last week JPMorgan said it was re-assessing Nigeria’s inclusion in its emerging market bond index, putting a question mark over one of the few non-oil sources of government funding.
On Tuesday, the central bank kept its policy rate at 13 percent, offering no new measures to deal with a record low currency and inflationary risks linked to a collapse in world oil prices.
Instead, the governor noted that the naira was “appropriately priced” and warned speculators.
The bank has struggled to keep the naira in a new trading range since devaluing it by 8 percent against the dollar in November in an effort to halt a slide in its reserves.
