Naira depreciates on importers’ foreign exchange demand

The naira eased against the U.S. dollar on the inter-bank and the bi-weekly foreign exchange auction on Wednesday as strong demand for the dollar from importers exerted pressure on the local currency. The naira closed at N160.90 to the dollar on the inter-bank market, compared with Tuesday’s close of N160.80. Bankers said the market had adjusted to the reduction in the net open position for banks announced last week by the central bank.
The Central Bank last week raised the cash reserve requirement for banks to 12 per cent from 8 per cent and reduced net open foreign exchange positions to 1 per cent from 3 percent to support the naira.
“There is significant demand in the market … (but) dollar inflows from oil companies and offshore interest in local debt have kept the naira in bound, otherwise it would weaken further,” one dealer said.
Bankers said the local unit of Chevron sold $24 million to some lenders on Wednesday, which was not enough to support the currency. They said most importers had brought forward their obligations to take advantage of the initial appreciation in the naira due to the central bank’s policy measures meant to strengthen the currency, thereby adding to dollar demand.
“We see the naira crossing the N161 mark to the dollar level in the coming days if NNPC does not come to the market soon,” another banker said. NNPC is a major supplier of hard currency in the inter-bank market and the state energy firm sells currency to the market twice monthly. On the central bank forex auction, $250 million was sold at 155.86 per dollar, compared with $200 million sold at 155.84 to the dollar. It did not disclose the amount of dollar demand at the auction.