Naira hits two-month low, NNPC dollar sale fails

The naira fell to its lowest level in two months against the dollar on Wednesday, as the sale of the greenbacks by the Nigerian National Petroleum Corporation failed to meet market expectations.

Traders said the NNPC sold around $300m to some lenders, but this was not enough to give support to the local currency.

The naira closed at N162.87 to the dollar, compared with Tuesday’s close of N162.80. It was the lowest level seen since July 2, when the local currency closed at N163.10 to the dollar.

“A lot of demand targeted at the NNPC dollar sale hit the market, reducing the impact of the fresh dollar flow and weakening the naira further,” one dealer said.

Dealers said some lenders took the opportunity of the NNPC sale to cover their short positions, which left the market with little left to meet growing demand from importers and other foreign exchange end-users, according to Reuters.

The local unit had fallen to a seven-week low on Tuesday, hit by strong dollar demand and a squeeze in availability of the United States currency.

“Unless we see further dollar flows from offshore investors buying local bonds, and from some oil companies yet to sell dollars in the market, the naira will cross the N163 to the dollar mark soon,” another dealer predicted.

NNPC accounts for the bulk of dollars traded on the interbank market

The naira had eased against the dollar last week after some importers brought forward their forex requirements to tap into the month-end liquidity boost provided by oil companies selling the greenback to meet their local obligations.

NNPC accounts for the bulk of dollars traded on the interbank market and usually sells dollars to some lenders once or twice every month.