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Dollar Demand Wanes at CBN Auction, Naira Strengthens

By on October 17, 2011

The Naira strengthened today at the CBN auction due to unusually low demand for the US Dollar. Demand for the greenback fell approximately 50% from $592 Million at the last auction to $297 Million, far below the $ 400 million offered by the Central Bank.

The Central Bank sold the entire dollar demanded at the rate of N 149.95. Demand pressure is expected to consistently ease due to measures implemented by the CBN, which includes a ban on Major Oil companies concerning their utilization of the auction to finance importation of downstream oil an gas products.

Other key measures implemented by the bank include raising the key interest rates by 2.75% to 12%. Whilst these measures are largely viewed to have a positive effect on the easing on the pressure on the rates, the inter-bank market does not yet seem to be reacting positively to the developments, as the dollar is still trading at overtly superior levels to the Naira.