Naira depreciates further as CBN fails to meet demand

The value of the naira dropped against the U.S. dollar at both the inter-bank market and at the CBN bi-weekly auction yesterday as the Central Bank could not meet demand the for the dollar. The naira closed at N159.75 to the dollar on the inter-bank market compared with Tuesday’s close of N158.90 after the central bank failed to meet demand at its official window, putting pressure on the local currency.
At the official window, the central bank sold only $250 million at N156.21 to the dollar, short of the $411.62 million demanded. It sold $250 million at N155.21 at the previous auction on Monday. “The naira depreciated because the central bank did not meet demand,” a banker said, adding that the market had expected the bank to intervene to stem the decline, which didn’t happen.
“If they (central bank) do not intervene then rates will reach 160.” he said. Bankers said some oil firms sold a total of $120 million to some banks as part of their month-end foreign exchange sales, which was not enough to fill the dollar demand gap.
The central bank moved it target trading band for the naira on Monday to N150-N160 from N145-N155 previously due to prolonged weakness of the local currency and high dollar demand. Bankers said market trading had priced in the policy move ahead of the announcement and was now looking to the bank to keep the naira within the new trading band.