Naira depreciates to two months low on dollar demand

The naira depreciated to its lowest level in two months against the U.S dollar on the inter-bank market yesterday, on strong dollar demand from investors repatriating their dividends abroad bankers said.
Also yesterday the CBN said that the nation’s foreign exchange reserves rose to their highest in 21-months to $37.02 billion by May 14, from $36.66 billion at the end of last month. Foreign exchange reserves in stood at $33.94 billion a year ago. The last time the reserves were at this level was in August 2010.
However the naira closed at N158.90 to the dollar on the inter-bank market, the lowest since the middle of February, compared with the N158.03 it closed at on Tuesday.
“The market was hit by large demand for the dollar with which it could not cope with due to lack of dollar flow, putting pressure on the naira,” one banker said. Foreign Exchange traders said that several foreign investors are taking profit on their investments, thus increasing pressure on the local currency. The naira had traded around the N157.10-N157.90 to the dollar band for the better part of the last two months on the impact of dollar sales by oil companies and offshore investors who are investing in Nigeria’s short-dated debt notes.
“We see the naira depreciating further in the coming days unless the central bank intervenes to calm the market,” another bank foreign exchange trader said. The local unit remains within the central bank’s N150-N160 target band. On the official window, the central bank raised its supply to $200 million and sold at N155.70 to the dollar, compared with $150 million sold at N155.70 to the dollar on Monday.