Naira Slips at CBN’s twice-weekly auction

Nigeria’s naira depreciated to the weakest in almost two months against the dollar at a foreign- currency auction today after the central bank failed to meet demand that rose to highest level this year.

The currency of sub-Saharan Africa’s second-biggest economy declined to 151 per dollar at the central bank’s twice-weekly auction, its weakest since the June 29 sale. The central bank sold $400 million at the currency auction, less than $592 million demanded by lenders, the largest amount sought since Dec. 15. The sale is the 11th consecutive auction where the central bank didn’t meet lenders’ demand.

Africa’s biggest oil producer has been using foreign- currency reserves to keep the naira within a 3 percentage-point band above or below 150 per dollar at its bi-weekly auctions to help check inflation, which slowed to 10.2 percent in June from 12.4 percent in May, remaining above the targeted rate of 10 percent.

“The naira bowed to pressure from cumulative demand for dollars, for refined petroleum and manufactured-goods imports,” Wale Abe, chief executive officer of the Financial Market Dealers Association, an interbank clearing house for Nigerian banks, said by phone from Lagos today. “Many requests that were not met at previous auctions were presented by lenders.”

The central bank doubled the amount of dollars banks can sell to foreign-exchange bureaux on Aug. 12 to $1 million to further reduce demand pressure which has seen a widening in the gap between their exchange rates and those used by banks and bureau de change operators.

The external reserves of the West African country stood at $35.3 billion as at Aug. 11, compared to $38.6 billion a year earlier.

The naira weakened 0.2 percent to 153.85 per dollar in interbank trading, at 5:18 p.m. in Lagos, according to data compiled by Bloomberg.