Naira falls as CBN fails to meet dollar demand

The naira fell against the United States dollar at both the inter-bank market and the bi-weekly auction on Wednesday as the Central Bank of Nigeria again failed to meet demand for the greenback.The naira closed at N159.75 to the dollar at the inter-bank market compared with Tuesdays close of N158.90 after the CBN failed to meet demand at its official window, thereby putting pressure on the local currency.At the official window, the CBN sold only $250m at N156.21 naira to the dollar, short of the $411.62m demanded. It sold $250m at N155.21 at the previous auction on Monday.Currency dealers attributed the decline in the naira to the inability of the apex bank to meet dollar demand at the auction.Dealers noted that the naira could have gained if the CBN was able to meet the demand after the new measures put in place to reduce the demand for dollars.They, however, said that the naira might ease to N160 at the inter-bank market on Thursday if the CBN failed to intervene.Meanwhile, oil firms sold a total of $120m to some banks as part of their month-end foreign exchange sales. This, was, however, not enough to fill the dollar demand gap.The Monetary Policy Committee on Monday announced the devaluation of the naira, setting the new official exchange rate at N155 to the dollar from its previous rate of N150 and maintaining the band of plus or minus three per cent.The new exchange rate represents 3.2 per cent devaluation in the face of heightened demand for forex and the depletion of the countrys foreign reserves in an attempt to defend the value of the naira.According to the CBN Governor, Mr. Lamido Sanusi, the new exchange rate band means that the naira should float roughly within a range of N150 to N160 per dollar, unless extraordinary shocks necessitated a change in stance.Inter-bank lending rates had climbed to an average of 15.50 per cent last week, from 13 per cent the previous week after foreign exchange, bonds and treasury bills purchases drained liquidity in the system.Currency dealers had said liquidity in the system receded drastically last week with the market opening last Friday with a cash balance of N84bn ($529.63m) from about N214bn the previous week.
Click here to read full news..