CBN Halts Currency Auctions for 2011 as Naira free falls

The naira headed for its weakest in about 10 weeks as dollar demand shot up on bets the Nigerian currency may further decline with the end of central bank auctions for the year.

The currency of Africa’s biggest oil producer declined 2.2 percent in interbank trading to 162.97 per dollar at 12:06 p.m. in Lagos, its weakest since Oct. 10, according to data compiled by Bloomberg.

There are speculations the central bank may also stop direct dollar sales to lenders after today’s end of the twice- weekly auctions, “so there is a rush to buy the foreign currency by dealers,” Tunde Ladipo, chief executive officer of Lagos-based Valuechain Investment Ltd., which trades currencies, said by phone today. “The central bank has slowed its intervention since last week, with the market sustained mainly by the year-end dollar sales of oil companies.”

Nigeria lowered the midpoint of its exchange-rate band at the auctions on Nov. 21 to 155 naira per dollar from 150 naira as rising imports and weakening oil prices increased pressure on the currency. Sub-Saharan Africa’s second-biggest economy depends on oil exports for more than 95 percent of foreign income, according to the Finance Ministry.

The official currency auctions will close for the year after the Dec. 21 sale and will reopen in January, Muhammed Abdullahi, a spokesman for the central bank in Abuja, said on Dec. 19.

Source: Bloomberg