Appetite for Forex Wanes at WDAS

The demand for foreign exchange observed at the Central Bank of Nigeria’s (CBN) Wholesale Dutch Auction (WDAS) diminished further Monday after the strong demand that was put up by dealers last month.

 

Dealers attributed the development at the bi-weekly auction to a reduction in the demand for the greenback by importers.

 

THISDAY check Monday showed that just as the apex bank reduced the total amount of dollar supply by $150 million yesterday, compared with last Wednesday’s auction, total demand by dealers also fell by $77 million compared with the previous auction.

 

Specifically, whereas the banking watchdog offered a total of $250 million yesterday, the 22 banks that participated in the auction put up a total demand of $351 million.

The regulator had offered a total of $400 million at last Wednesday’s auction as against the $428 million that was demanded by dealers. Dollar demand had risen to as high as $586 million last month while the regulator increased its supply to $600 million.

 

CBN Governor, Mallam Sanusi Lamido had said that the pressure in the system then was temporary and had partly attributed the jump in demand for the greenback to panic by investors that violence between religious and ethnic groups may disrupt the ongoing elections.

 

However, the Naira, Nigeria’s local currency slumped slightly by 12 kobo against the dollar at the WDAS Monday as it stood at N152.31/$1, compared with the N152.19/$1 it traded last Wednesday.  Similarly, findings showed that the local currency fell against the dollar at the parallel market Monday as it dropped by N1 to N157 to a dollar     as against the N156 to a dollar it stood on Friday.

 

“We observed that the demand for dollar by importers has reduced since last week. Probably most of them have their eyes on the elections so that they can know the outcome,” a member of the Financial Market Dealers Association of Nigeria (FMDA) who pleaded anonymity said.

 

Meanwhile, Nigeria’s 2021 dollar bond fell Monday, giving up some of its recent steep gains, as last weekend’s National Assembly election showed President Goodluck Jonathan’s Peoples Democratic Party (PDP), the ruling party was losing ground to the opposition.

 

Reuters said the bond was down 3 points to 100, the lowest since end-March, adding that the yield jumped almost to 6.75 per cent.

 

Nigeria’s portion of the EMBI Global Diversified Sovereign Emerging Bond Index 11EML widened 10 basis points to 294 basis points over U.S. Treasuries. It had tightened 30 basis points on Friday ahead of the election as investors priced in an easy win for Jonathan.

source : Thisday