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Naira Appreciates as Pressure Eases at WDAS

By on April 28, 2011

The naira, Nigeria’s local currency appreciated at the Central Bank of Nigeria’s (CBN) Wholesale Dutch Auction system (WDAS) Wednesday following the successful outcome of the final stage of the general election held in most states on Tuesday.

The local currency advanced by 38 kobo against the US dollar to N153.08 to a dollar. as against the N153.46 to a dollar it stood at last Wednesday’s auction.

This was also attributed to the reduced pressure that was observed at the WDAS. Total demand for the greenback dropped by 14.5 per cent to $277.066 million Wedday, as against the $323 million total demand that was recorded last week Wednesday. The banking watchdog also reduced its supply of the dollar at yesterday’s session by 37.5 per cent.

Specifically, while the regulator offered a total of $250 million, the 18 banks that participated at the auction put up a total demand of $277.06 million.

The market had recorded a total supply of $400 million last week Wednesday, as against a total supply of $323 million. The first session of the bi-weekly market could not hold on Monday because of the public holiday that was declared in commemoration of the Easter celebration.

Some dealers said the success of the election would further ensure stability at the forex market and would boost investor confidence in the economy.

But the local currency was firm at other segments of the forex market. At the Bureau De Change (BDC) and parallel segments, the naira maintained its N156/$1 and N157/$1 respectively.

Meanwhile, save for the Overnight and 7-days tenor of the Nigerian interbank lending rates, other placement period fell Wednesday.

For instance, while the Call (Overnight) tenor jumped to 10.62 per cent, compared with the 10.54 per cent it attained last Thursday, the 7-days tenor also leapt to 11.17 per cent Wednesday, from the 11.16 per cent.

Market watchers which forecast a reversal in the trend from today, argued that the impact of the treasury bills auction by the CBN may drain liquidity from the system and therefore trigger a northward shift in rates.

The regulator had auctioned N76.73 billion in 91-, 182- and 364-day treasury bills Wednesday as part of measures to curb inflation. The CBN had auctioned N30 billion in 91-day bills and N46.73 billion in 182-day bills, using the Dutch Auction System (DAS).

Source : Thisday