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WDAS: Naira Depreciates as Dealers Raise Dollar Demand

By on April 14, 2011

The Naira, Nigeria’s local currency was slightly hurt against the United States dollar at the Central Bank of Nigeria’s (CBN) Wholesale Dutch Auction System (WDAS) Wednesday following stronger demand for the greenback put up by dealers.

THISDAY check showed that demand put up by currency dealers at the second bi-weekly auction was 26 per cent higher than the total demand recorded at Monday’s auction.

The naira fell by 40 kobo to N152.71 to a dollar at Wednesday’s auction, as against the N152.31 to a dollar it stood at end of Monday’s auction.

Specifically, whereas the regulator offered a total of $300 million to the 22 banks that participated at the auction, dealers put up a total demand of $443.816 million. The total amount of the greenback offered Wednesday was 20 per cent higher than the amount offered at the previous auction.

The apex bank had sold a total of $250 million at Monday’s auction, less than the $351 million demanded.

CBN Governor, Mallam Sanusi Lamido Sanusi had said that the official exchange rate will remain within the band of three percent above or below N150 per dollar even if dollar demand rises amid the ongoing elections. The regulator had stated that the + or – 3 three per cent band was wide enough to guard against flexibility.

According to Sanusi, in a pre-election period, all investments are suspect, adding that the + or – three per cent band is wide enough to ensure flexibility without volatility. The value of the local currency had dipped consistently at the WDAS market last month as a result of huge demand for foreign exchange, without commensurate supply in the month.

Dealers had to resort to the interbank market to cover the shortfall, thereby transferring the weight of the dollar demand to the market. Therefore, attempt by the interbank market to fill the supply gap shifted the pressure to that segment of the market, resulting into a slide in the local currency against the greenback as it shed 55 kobo to N155.45/$1 Wednesday, as against the N155.45/$1 it stood the on Tuesday.

Further finding showed that lack of dollar injections from autonomous sources, such as supply from multinational Oil and Gas firms and the Nigerian National Petroleum Corporation (NNPC) also impacted on the fate of the naira against the dollar at the interbank market Wednesday.

But the naira firmed against the dollar at both the Bureau De Change (BDC) and parallel segments of the market where it maintained it value of N156/$1 and N157/$1 respectively.

Source : Thisday