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Naira set for lowest level in two weeks

By on April 17, 2013

The naira retreated on Tuesday, heading for its lowest level in two weeks, as importers were said to increase demand for dollars.

The currency declined by 0.2 per cent to N158.25 per dollar in Lagos, according to data compiled by Bloomberg. The naira has fallen 1.3 per cent this year.

Nigeria relies on imports to cover 70 per cent of its own fuel needs because of inadequate refining capacity, and those shipments into the country are a source of pressure on the naira.

Ecobank Transnational Incorporated strategists, led by Paris-based Paul-Harry Aithnard, wrote in a note, “Increased dollar demand to cover import bills and other foreign exchange obligations is pressuring the naira, despite CBN’s aggressive liquidity management efforts.”

Borrowing costs on the nation’s local-currency debt due January 2022 fell one basis point, or 0.01 percentage point, to 11.01 per cent, according to prices compiled by the Financial Markets Dealers Association on Monday.

Yields on Nigeria’s $500m of Eurobonds due January 2021 were little changed at 3.986 per cent on Tuesday.

The CBN sold a total of $3.89bn at the Wholesale Dutch Auction System in the first quarter of this year.

Calculations by our correspondent showed that the central bank also offered a total of $4.04 within the period at the bi-weekly foreign exchange auction.

The figures obtained on the CBN website showed that the bank sold $833.48m in January, while a total of $940m was offered during the same period.

In February, the CBN increased the amount of dollar it sold to $1.153bn in February, while offering $1.160bn, representing an increase of $319.52m and $220m, respectively.

In the same vein, the bank increased its dollar sales to $1.903bn in March with an offer of $1.94bn.

External reserves, which have risen steadily since last year due to reasonably high oil prices and stability in the foreign exchange market, rose higher to $49bn last week.