CBN Fails to Meet Demand for Greenback at Auction

By BusinessNews Staff on October 24, 2011

Nigerian Naira depreciated marginally today as the CBN was unable to meet the demand for the greenback.
The echelon bank was only willing to sell $350 Million as against $421 Million demanded by the market.
The CBN has been trying new innovative strategies in order to keep the Naira from free falling as economic pressures are thrust upon the national currency.
Inflation is up, the threat of removal of subsidy is also causing certain private sector elements to hoard the dollar in fears that the currency may skyrocket if the Federal Government pulls the plug on the fuel subsidy program.
Furthermore imports are at an all time high as the receipts from petro dollars are driving more and more consumption tat cannot be fueled by local manufacturing capacity due to epileptic power supply and poor patronization of Made in Nigeria goods.
The CBN has been implementing drastic measures including the hiking of the key lending rate by 275 basis points to 12%, as well as barring oil majors from financing their trade activities from US dollars sourced from the Dutch Auction.
Last Friday, the apex bank said it will begin to sell dollars directly into the market more regularly and apart from the twice weekly scheduled auctions. The bank also allowed banks to increase their dollar reserves by 200 basis points to 3%.
The Naira is currently trading on the interbank market at around N 160 and a few Naira more on the parallel market.