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Naira falls as CBN fails to meet Dollar demand

By on July 16, 2012

The naira depreciated after the Central Bank of Nigeria failed to meet accumulated demand for dollars at an auction today, having sold the lowest amount of the U.S. currency in more than two months last week.

The currency of Africa’s largest oil producer weakened 0.6 percent to 162.25 per dollar as of 3:18 p.m. on the interbank market in Lagos, according to data compiled by Bloomberg.

The central bank sold $200 million at a foreign-currency auction today, with lenders buying the entire amount on sale, the Abuja-based bank said in an e-mailed statement. The regulator sold $343.5 million last week, the least since the five days to May 11. The bank said on July 6 it set a limit of two business days for the use of foreign currency bought at its twice-weekly auctions.

“The sale by the central bank is not enough to meet the accumulated demand, so the naira remains under pressure,” Sewa Wusu, a currency analyst at Lagos-based Sterling Capital Ltd., said by phone today.

Despite the central bank’s measures, “corporate demand is still prevalent, which suggests that the naira will continue to fluctuate in a broad range,” Celeste Fauconnier and Nema Ramkhelawan-Bhana, strategists at Rand Merchant Bank, wrote in a report today.

Nigeria approved a tender on June 27 to import 3.135 million metric tons of gasoline in the third quarter, the Petroleum Products Pricing and Regulatory Agency said. The country relies on imports to meet 70 percent of its fuel needs because of inadequate refining capacity, Petroleum Minister Diezani Alison-Madueke said in November.

Reserves

The country’s foreign-currency reserves have fallen by $1.2 billion since the end of May to $36.45 billion, according to July 12 data compiled by the Abuja-based central bank.

The yield on Nigeria’s domestic 15.1 percent bonds due 2017 rose four basis points to 16.11 percent, according to July 13 data on the Financial Markets Dealers Association website. Yields on the nation’s $500 million of Eurobonds due 2021 dropped eight basis points to 5.445 percent.